Arcan Resources report that the Corporation exited 2011 with production of over 6,000 barrels of oil equivalent per day and its estimated current production capacity is approximately 6,400 BOE per day.

Arcan continues to utilize three drilling rigs and expects to fracture and complete four additional new Beaverhill Lake horizontal wells per month during the first quarter of 2012.

Operations Update

Drilling and Completions - Over the course of 2011, Arcan drilled 32 and completed 31 horizontal wells in the Swan Hills, with the majority of the activity concentrated in and around the Ethel development area. Arcan's ten most recent wells were completed with 20 to 30 fracture stimulation stages per horizontal well. As a result of such fracture stimulation stage increases, these wells have displayed 30-day initial average production rates that are approximately 15 percent higher than the previous wells completed with only 14 stages. Overall, Arcan's new well results are predictable and consistent with previously announced type curves, with an average 30-day initial production rate of approximately 400 BOE per day. Arcan continues to optimize its completion techniques with 20 to 24 fracture stimulation stages per horizontal well and acid volumes ranging from 1,200 to 1,400 m3 per well using Arcan's proprietary "STIM 28" acid blend. Arcan is currently drilling its 53rd, 54th and 55th wells, one of which is Arcan's first well in the Virginia Hills area of Swan Hills. Currently, Arcan has seven horizontal wells drilled and waiting on completion.

Facilities - Arcan continuously manages its facilities to ensure minimal production capacity constraints and down-time. Arcan is currently constructing two oil gathering lines, and one high pressure water injection pipeline, which will allow production from the Ethel field to be gathered and processed at the Deer Mountain Unit #2 facility by the end of the first quarter of 2012, lowering Arcan's overall operating costs and well down-time. This pipeline construction is also part of the large scale implementation of the waterflood project planned for the Ethel area.

In addition, the previously announced third party oil sales pipeline disruption that occurred during the summer of 2011 which impacted the Deer Mountain Unit #2 facility, has been resolved with sales oil moving through the pipeline as of January 6, 2012. The Corporation anticipates that this resolution will significantly decrease clean oil trucking and lower area operating costs going forward.

Waterflood - Arcan continues to see positive results in its Deer Mountain Unit #2 due to ongoing optimization of the water injection enhanced oil recovery ("EOR") scheme. Arcan has observed production increases in both horizontal and vertical wells as a result of modifications made to its EOR scheme in the third quarter of 2011. Currently, Arcan is injecting at a voidage replacement ratio ("VRR") of approximately 0.8. A VRR of 1.0 is required to stabilize field operating pressures by injecting an equivalent amount of water to the production that is being removed. Water injection has also commenced in a horizontal injection well for the first time by Arcan, providing pressure support to a heavily depleted portion of the reservoir. Arcan estimates that the ongoing conversion of old vertical wells, for additional saline Manville source water, will allow Arcan to reach a targeted VRR of 1.0 shortly. Seven additional injector conversions are currently underway for a scheduled injection increase in March, 2012, lifting estimated VRR to 1.2 by end of the first quarter of 2012. Water injection in the Ethel field commenced in December 2011 with the conversion of Arcan's well at 4-22-67-8W5. Included in Arcan's waterflood project work is the drilling of up to six water injection wells and the conversion of three existing wells in Ethel by the end of the third quarter of 2012.

Arcan estimates that early water injection into the Ethel area will assist in pressure maintenance and have positive impacts on well decline profiles. Production history in the area shows that under waterflood oil recoveries could ultimately exceed 40 percent of the original oil in place.

Guidance - Arcan's acquisition of StimSol Canada Inc. ("StimSol") in late 2011 continues to enable Arcan to plan and execute an aggressive completion schedule with acid supply certainty. Arcan's StimSol Swan Hills blending facility commenced operations in January 2012 and ensures that a quality acid blend is in close proximity to Arcan's operations, minimizing trucking and enabling efficient execution of completion services. Arcan plans to continually monitor economic conditions throughout 2012 and adjust capital spending accordingly in order to maintain a healthy balance sheet. Arcan's current budget provides for the drilling of up to 40 additional wells, for which all services and materials have been secured, over the course of 2012.

Arcan also announces that on January 20, 2012, pursuant to the provisions of its stock option plan, it granted an aggregate of 90,000 options to acquire an equivalent number of common shares of Arcan to certain officers and employees of Arcan. The options have an exercise price of $5.24 per share. The options expire on January 20, 2017. All stock option grants of Arcan are subject to receipt of the necessary regulatory approvals, including the approval of the TSX Venture Exchange.

Tags: Arcan Resources Ltd.