Oilsands Quest files Form 10-K Annual Report and Amended Financial Results

NYSE Amex: BQI

CALGARY, July 30 /PRNewswire-FirstCall/ - As previously announced by Oilsands
Quest Inc. (NYSE Amex: BQI) (the "Company") on July 14, 2009, the Company
extended the date for filing its Form 10-K for the year ended April 30, 2009
(the "2009 10-K"). The Company announces that it has filed the 2009 10-K with
the United States Securities and Exchange Commission (the "SEC"). The Company
has also filed an amended Form 10-K/A for the year ended April 30, 2008 and
amended Form 10-Qs for the quarterly periods ended July 31, 2008, October 31,
2008 and January 31, 2009. These amended filings reflect the restatement of
the Company's consolidated financial statements for the years ended April 30,
2007 and April 30, 2008 and the quarterly periods ended July 31, 2007 to
January 31, 2009. The restatements primarily relate to the accounting for the
consideration exchanged in the acquisition of the Company's remaining
non-controlling interest in Oilsands Quest Sask Inc. in August of 2006. For a
discussion of the changes to the Company's consolidated balance sheets and
consolidated statements of operations, cash flows and stockholders' equity and
comprehensive income, and a reconciliation of amounts previously reported, see
note 2 to the Company's consolidated financial statements included in its
amended annual report on Form 10-K/A for the year ended April 30, 2008 filed
today with the SEC.
As discussed in the Company's amended filings and its 2009 Form 10-K,
Management has also completed its review of its internal controls over
financial reporting and disclosure controls and procedures. The Company has
identified a material weakness in its controls relating to the accounting for,
and reporting of, complex and non-routine transactions. The Company intends to
remediate the material weakness described above and has disclosed its
remediation plan in its amended filings and the 2009 Form 10-K.
Copies of the amended filings and the 2009 10-K are available online at the
SEC's website (www.sec.gov) and on SEDAR (www.sedar.com).

Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis presents Management's perspective of our
business, financial condition and overall performance for the year ended April
30, 2009 as reported in the 2009 Form 10-K. This information is intended to
provide investors with an understanding of our past performance, current
financial condition and outlook for the future. Our discussion and analysis
relates to the following topics:

- Overview of Business
- Overview of 2009 Results and Outlook
- Liquidity and Capital Resources
- Changes in Financial Condition and Results of Operations
- Share Capital

Overview of Business
--------------------

We are a U.S. public company based in Calgary, Alberta engaging in a variety
of projects in the oil and gas sector and in particular the oil sands and oil
shale sectors in Western Canada. We are aggressively exploring Canada's
largest contiguous oil sands land holding, which is located in northeast
Alberta, northwest Saskatchewan and Oilsands Quest is leading the development
of an oil sands industry in the Province of Saskatchewan.
Oilsands Quest, together with its subsidiaries, is in the exploration and
development stage and does not currently have any income from operating
activities.

Overview of 2009 Results and Outlook
------------------------------------

During the year ended April 30, 2009, the Company's activities included an
exploration drilling program of 57 delineation test wells on its permit lands
in Saskatchewan and Alberta, advancement of its pre-commercialization
evaluation studies on and reservoir test program on its Axe Lake Discovery, a
comprehensive 2-D and 3-D seismic program in Saskatchewan and on adjacent
Alberta permits, and an extensive environmental program consisting of
monitoring and baseline assessment studies.
During the year ended April 30, 2009, we raised $144.4 million, net of
issuance costs, through private placement share issuances, a marketed public
offering and proceeds of warrant and option exercises to fund these activities
and future programs.

Operations Summary:

Exploration Program

In the fall of 2008, we drilled 31 exploration and delineation test wells in
the Axe Lake area, and three exploration test wells in Saskatchewan. In early
2009, we drilled 23 exploration and delineation test wells in Raven Ridge.
Evaluation of the drilling data is currently underway. A 25 mile (40
kilometer) 2-D seismic program was conducted on Saskatchewan permits which
have not been explored by us through drilling or seismic exploration. We are
also continuing with the interpretation of the 1,847 kilometers (1,149 miles)
of 2-D and 3-D seismic data collected and processed in the 2007/2008 winter
program, which is aiding in the characterization of the reservoir and adjacent
formation specific to our three test sites at Axe Lake and the reservoirs at
Raven Ridge and in assessing the geological structures on our lands.

Axe Lake Discovery - Reservoir Development Activities

At Test Site 1, we drilled and completed six vertical test holes and drilled
three 750-metre horizontal holes (300 metres length within the reservoir). We
have procured the horizontal well instrumentation strings necessary to measure
the temperature and pressure in the reservoir. We have completed construction
of water treatment, steam generation and extraction collection facilities,
which includes three steam generators, two diesel power generators, water/oil
treatment and oil handling equipment, control systems and eight heated liquid
storage tanks to support related Test Site 1 activities. We are nearing
completion on the vertical well modules and the supporting electrical and data
acquisition systems.
During the year we continued to work on comprehensive simulation studies to
develop guidelines on how to best operate the recovery process for the six
vertical multi-purpose test holes for the Axe Lake Test Site 1 reservoir test
program. The numerical reservoir simulation studies and the supporting
laboratory experiments focused on demonstrating fluid mobility and
communication between the vertical wells along the bottom of the oil sands
reservoir. A comprehensive reservoir monitoring program to support the
reservoir test program for the six vertical test holes and three horizontal
wells has been developed which includes pressure and temperature monitoring,
actual performance versus modeled performance and possible geophysical
logging.
Also at Test Site 1, we completed two mini-frac tests that successfully
measured the relevant geo-mechanical properties of the oil sands reservoir, as
well as the overburden and underburden close to the oil sands reservoir.
Calibration of the numerical reservoir simulation tools to the mini-frac tests
by conventional history matching techniques is near completion and will
support the detailed planning of the initial cold water injection test.
At Test Site 2, the front-end engineering and design work on a facility for
solvent testing using hot propane vapor, initiated earlier in the year, is now
complete. Construction has been deferred until funding is in place for these
tests.
At Test Site 3, we are conducting initial low energy tests using a custom,
downhole electrical heater. We measure pressures and temperatures at ten
different locations inside the oil sands reservoir. This information has been
used for preliminary calibration of our reservoir simulator. Information from
the simulator will help maximize the efficiency of the steaming tests on the
vertical well program at Test Site 1. We have drilled, completed and
instrumented two vertical test holes together with the supporting
infrastructure. Ongoing heating of the reservoir was initiated in late October
2008 and re-commenced in mid-January of 2009 with the heater placed at the
depth of the Devonian underburden. In April of 2009, the heater was raised at
the bottom of the oil sands reservoir and heating was continued. The data
gathered from these low energy tests will provide the Company with preliminary
in-situ reservoir performance data to be used for simulation modeling in
preparation for hot water and steam injection at Test Site 1 and in the
continued planning for Test Sites 2 and 3. The program at Test Site 3 has
enabled the determination of critical reservoir properties such as effective
thermal conductivity and the initial low energy test is nearing completion
subject to regulatory and management approvals with the determination of
relative permeability of the reservoir at different temperatures.

Abandonment and Reclamation Costs

We are responsible for compliance with terms and conditions of environmental
and regulatory approvals and all laws and regulations regarding the
abandonment of a project and reclamation of its lands at the end of its
economic life, which abandonment and reclamation costs may be substantial. A
breach of such legislation and/or regulations may result in the issuance of
remedial orders, the suspension of approvals, or the imposition of fines and
penalties, including an order for cessation of operations at the site until
satisfactory remedies are made. As at April 30, 2009, we estimate the total
undiscounted inflation-adjusted amount required to settle the asset retirement
obligations in respect of the Company's wells and facilities is approximately
$8.2 million. This estimate includes the costs to reclaim the air strip, camp
site, access roads and reservoir test sites which are being brought into
income over a period of 10 to 30 years. The initial measurement of an asset
retirement obligation is recorded as a liability at its fair value, with an
offsetting asset retirement cost recorded as an increase to property and
equipment or exploration expense

Outlook
-------

Over the next twelve months we plan to continue the activities necessary to
increase our resource base and to demonstrate the recoverability of our oils
sands resources. Subject to our financial resources, we will continue to
pursue exploration programs on our permit and license lands.
We are continuing our testing program based on the current geological
interpretation that there is no capping shale in direct contact with our oil
sands reservoir. The results of our advanced laboratory studies and numerical
reservoir simulations indicate that bitumen production can best be achieved
using a reconfiguration of horizontal wells at the bottom of the reservoir.
Our analysis points to the three essential elements for a successful
application of the bottom-up approach to bitumen extraction: establish and
maintain mobility at the bottom of the oil sands reservoir, utilize the full
length of the horizontal wells while the bitumen is being produced, implement
a comprehensive reservoir monitoring system to observe and manage the growth
of the swept zone. A sequential approach to the reservoir test program is
required, both in the scale of the field operations at Test Site 1 and by
moving from vertical wells to short horizontal wells and then to commercial
length horizontal wells. In addition, as part of future pilot activities the
detailed operations protocol will move from cold water to hot water to steam
at each step for the different well configurations.
In the Axe Lake reservoir test program we expect to conclude the initial
testing at Test Site 3 and commence operations at Test Site 1 to demonstrate
that we can establish and maintain communication between vertical wells at the
bottom of the reservoir using water and steam. The following is an overview of
key activities planned in the next twelve months although our plans are
subject to change based on many factors, some of which are beyond our control:

- At Test Site 1, we will be commissioning and starting-up the vertical
well test program during the remainder of 2009. Detailed planning of
the test is on-going, including incorporating the testing results
generated from Test Site 3.
- Operations at Test Site 1 are scheduled to begin later this summer
subject to regulatory and other approvals. Water and steam will be
injected into the reservoir in order to mobilize the bitumen at the
bottom of the McMurray formation using the vertical test holes.
- We expect to drill and complete relevant surrounding observation
wells and to design, construct and commission the necessary surface
facilities at the well site.
- Water and steam injection into the horizontal wells are planned to
begin following the completion of the surface facilities associated
with the horizontal test holes. Results from the vertical well
program will be incorporated.
- For the comprehensive reservoir monitoring program, six vertical
observation wells for cross-well seismic monitoring and 4 shallow
vertical wells for micro-seismic monitoring will be drilled and
completed prior to commencement of vertical well operations.
- We are planning a program to evaluate the characteristics of the
overburden at Axe Lake in late 2009. The program, in combination with
our extensive 3-D seismic data, is expected to enhance our
understanding of the formation overlaying our bitumen deposit.
- We will continue our reservoir characterization efforts and continue
to evaluate well data, perform petrophysical analyses, design and
execute pertinent geophysical logging and perform advanced laboratory
studies.
- At Test Site 3, we were applying heat to the reservoir utilizing a
down-hole electric heater but have concluded this test.
- We are continuing the planning of additional exploration programs to
further define the location, extent and quality of the potential
bitumen resource in Axe Lake, Raven Ridge, Wallace Creek and Eagles
Nest.
- We expect that results from our planned activities will enable us to
establish a commercial development plan including a pilot project for
Axe Lake.
- In addition, we will not begin any field activities related to Test
Site 2, where tests on the use of recovery processes based on
mobilization agents other than steam, such as hot propane were
planned.
- Infrastructure remains a critical element for continued operations
and we will continue to investigate various pipe line solutions for
gas and liquids transport, different trajectories for permanent road
access and possible solutions for the provision of power. We will
design and start the execution of a base plan for all infrastructure
needs.
- Efforts are also continuing on converting a portion of our
Saskatchewan permits to lease pursuant to the Oil Shale Regulations,
1964, as amended. The permits will not be converted to leases until a
development plan which will require an Environmental Impact
Assessment has been developed.
- We intend to maintain our asset base and core technical team in order
to advance to commercial development plan for our resource.

We have sufficient funds to carry out our planned activities over the next
twelve months. If we accelerate commercial development at Axe Lake or any of
our other prospects, our cash requirements will increase significantly.
Additional funding may also be required if our current planned activities are
changed in scope or if actual costs differ from estimates of current plans. We
believe the Company will have access to sufficient funding and sources of
capital for its planned activities through to April 30, 2010. Because we
constantly and actively monitor our expenditure budgets, if sufficient funding
is not available we can adjust our expenditure plans based on available cash.
We plan to fund future operations by way of financing, including a public
offering or private placement of equity or debt securities. Our development
strategy also includes considering partners on a joint venture basis on our
specific projects to fund the development of such projects in a timely and
responsible manner. However, there is no assurance that debt or equity
financing or joint venture partner arrangements will be available to us on
acceptable terms, if at all, to meet these requirements. The Company has no
revenues, and its operating results, profitability and the future rate of
growth depend solely on management's ability to successfully implement the
business plans and on the ability to raise further funding.

Liquidity and Capital Resources
-------------------------------

The following discussion of liquidity and capital resources should be read in
conjunction with the consolidated financial statements included in Part II,
Item 8, "Financial Statements and Supplementary Data".
On May 23, 2008, the Company issued 12,976,761 shares of common stock at a
price of $4.20 per share for gross proceeds of $54,502,397 pursuant to a
private placement. The Company paid an aggregate of $1,225,120 in fees to a
syndicate of agents under the terms of an agency agreement.
On June 17, 2008, the Company issued 640,000 shares of the Company's common
stock as part of the consideration provided for the purchase of the rights of
the remaining external partners under the Triple 7 Joint Venture Agreement in
the Eagles Nest Prospect.
On October 3, 2008, the Company issued 6,008,156 shares of common stock on a
flow-through basis at a price of $3.675CDN ($3.40 US) per share for gross
proceeds of $22,079,973 CDN(US$20,421,727) pursuant to a non-brokered private
placement. These proceeds must be used for exploration in Canada and the tax
benefits from that exploration will flow through to the subscribers.
On October 3, 2008, the Company issued a further 4,800,000 shares of common
stock on a flow-through basis at a price of $3.675CDN ($3.40 US) per share for
gross proceeds of $17,640,000 CDN(US$16,315,204) pursuant to a private
placement. The Company paid an aggregate of $970,200 CDN(US$898,369) in fees
to the agents pursuant to an agency agreement. These proceeds must be used for
exploration in Canada and the tax benefits from that exploration will flow
through to the subscribers.
Under the terms of the flow-through shares issued on October 3, 2008, the
Company renounced the tax benefits of the related expenditures to the
subscribers effective December 31, 2008. As at April 30, 2009, approximately
CDN $26.3 million has been expended on exploration in Canada leaving
approximately CDN $13.4 million ($11.2 million US) to be incurred.
The October 3, 2008 flow-through shares were issued at a premium to the then
market price in recognition of the tax benefits accruing to subscribers. In
accordance with US GAAP the premium was originally recorded as a current
liability and then it was drawn down as a reduction of deferred tax expense as
the exploration expenditures were incurred.
Subsequent to April 30, 2009, the Company issued 35,075,000 units at a price
of $0.85 per unit for gross proceeds of $29,813,750 pursuant to a marketed
public offer. Each unit was comprised of one share of common stock and
one-half of a share of common stock purchase warrant with each whole warrant
entitling the holder to purchase one share of common stock of the Company for
$1.10 per share until May 12, 2011.

Changes in Financial Condition and Results of Operations
--------------------------------------------------------

During the year ended April 30, 2009, the primary focus of the Company was on
the engineering and construction of the testing facilities at Test Sites 1 and
3, the continued delineation of the Axe Lake and Raven Ridge discoveries and
completing the acquisition of all the remaining rights of the external joint
venture partners to the Triple 7 Joint Venture Agreement.

During the year ended April 30, 2008, the primary focus of the Company was the
delineation of the Axe Lake Discovery, exploring the Saskatchewan and Alberta
permit lands, raising exploration funds, completing the acquisition of an
outstanding $0.07 per barrel royalty obligation on the Saskatchewan permit
lands, completing the acquisition of all the rights of one of the three
external joint venture partners to the Triple 7 Joint Venture Agreement (which
encumbered the Eagles Nest Prospect) the acquisition of five oil sands
exploration licenses in Saskatchewan, the acquisition of two oil sands
exploration permits in Alberta, and the continuation of pre-commercialization
studies on our Axe Lake Discovery.

During the year ended April 30, 2007, the primary focus of the Company was
exploring the Saskatchewan permit lands, raising exploration funds, completing
the acquisition of the non-controlling (minority) interest (35.92%) in OQI
Sask, the acquisition of a 2.5% gross overriding royalty on the Saskatchewan
permit lands, the acquisition of four oil sands exploration permits in Alberta
and the initiation of pre-commercialization studies on our Axe Lake Discovery.

Net Loss

Year ended April 30, 2009 as compared to year ended April 30, 2008. The
Company experienced a net loss of $90,472,720 or $0.35 per share for the year
ended April 30, 2009 as compared to a net loss of $91,031,316 or $0.40 per
share for the year ended April 30, 2008. The Company expects to continue to
incur operating losses and will continue to be dependent on additional equity
or debt sales and/or property joint ventures to fund its activities in the
future.

Year ended April 30, 2008 as compared to year ended April 30, 2007. The
Company experienced a net loss of $91,031,316 or $0.40 per share for the year
ended April 30, 2008 as compared to a net loss of $86,262,516 or $0.50 per
share for the year ended April 30, 2007.

Exploration costs

Year ended April 30, 2009 as compared to year ended April 30, 2008.
Exploration costs for the year ended April 30, 2009 were $71,987,066 (2008 -
$96,419,694). Exploration costs in the current year relate to drilling,
seismic, environmental, engineering and construction costs associated with
Test Sites 1 and 3 on our Saskatchewan and Alberta permits. Approximately
$27.5 million was spent on drilling engineering and construction costs on Test
1 and 3 programs and the balance of costs relates to exploration and related
environmental monitoring activity of which approximately 65% was spent in
Saskatchewan and 35% was spent in Alberta. Our desire to decrease our
expenditures in response to the current conditions in the global and financial
markets is the main reason for the decrease from 2008 to 2009.

Year ended April 30, 2008 as compared to year ended April 30, 2007.
Exploration costs for the year ended April 30, 2008 were $96,419,694 (2007 -
$26,877,906). Exploration costs in the current year relate to drilling,
seismic and environmental work done on our Saskatchewan and Alberta permits.
Approximately $27 million was spent on seismic programs and the balance of
costs relates to exploration and related environmental monitoring activity of
which approximately 75% was spent in Saskatchewan and 25% was spent in
Alberta. In addition OQI recovered $242,748 on a uranium property interest
that had been previously written off, which was credited to Exploration costs.
Exploration costs for the year ended April 30, 2007 are detailed in the next
section. Increased activity on the Axe Lake Discovery is the main reason for
the increase from 2007 to 2008.

General and administrative

Corporate

Year ended April 30, 2009 as compared to year ended April 30, 2008. General
and administrative expenses settled with cash increased from $11,269,873 in
2008 to $14,075,520 in 2009. Expenditures for the ended April 30, 2009 consist
of salaries ($7.2 million), legal and other professional fees ($3.1 million)
and general office costs ($3.8 million). Expenditures for the year ended April
30, 2008 consist of salaries ($5.5 million), legal and other professional fees
($2.4 million) and general office costs ($3.4 million). Increases in costs in
the current fiscal year as compared to the prior year are mainly associated
with the cost of assembling the executive, professional and technical team
required to execute the Company's plans.

Year ended April 30, 2008 as compared to year ended April 30, 2007. General
and administrative expenses settled with cash increased from $10,576,994 in
2007 to $11,269,873 in 2008. The increase in total costs year over year is not
significant. Increases in certain costs (salaries and professional fees) were
offset by reductions in other areas (2007 included onetime reorganization
costs).

Stock-based consideration

Year ended April 30, 2009 as compared to year ended April 30, 2008.
Stock-based consideration expense for the year ended April 30, 2009 of
$17,311,893 (2008 - $19,247,333) consists of stock-based consideration related
to the issuance of options to directors, officers, employees and consultants
and to bonus shares issued to employees. The fair value of the stock options
was estimated using the Black-Scholes valuation model consistent with the
provisions of SFAS # 123R. The Black-Scholes valuation model requires the
input of highly subjective assumptions, including the option's expected life
and the expected price volatility determined using the historical volatility
of the Company's common stock. OQI has unrecognized stock-based compensation
costs of $11,433,179 related to unvested options which will be recognized in
future periods as the options vest. The decrease in stock based compensation
occurred as a result of the resignation of an officer. The Company modified
the terms of unvested awards that would have otherwise been forfeited which
resulted in a reversal of cumulative compensation costs on the awards and
immediate expensing of the modification-date fair value of the modified awards
for a net reversal of $2 million. Stock-based compensation is a non-cash
expense. The average value of the stock options using the Black-Scholes
valuation model issued during the year ended April 30, 2009 was $1.93 (2008 -
$3.69). The year over year decline in the average value of stock options is
due to the decline in the market value of the Company's stock.

Year ended April 30, 2008 as compared to year ended April 30, 2007.
Stock-based consideration expense for the year ended April 30, 2008 of
$19,247,333 (2007 - $54,510,209) consists of stock-based compensation related
to the issuance of options to directors, officers, employees and consultants
and to bonus shares issued to employees. The fair value of the stock options
was estimated using the Black-Scholes valuation model consistent with the
provisions of SFAS # 123R. The Black-Scholes valuation model requires the
input of highly subjective assumptions, including the option's expected life
and the expected price volatility determined using the historical volatility
of the Company's common stock. OQI has unrecognized stock-based compensation
costs of $12,607,254 related to unvested options which will be recognized in
future periods as the options vest. The large decrease in Stock-based
consideration in 2008 is due to the vesting terms of the stock options that
were granted in 2007. Approximately 3.9 million stock options that were
granted in 2007 vested in that same year compared to only 1.4 million stock
options that were granted in 2008. Stock based compensation is a non-cash
expense. Stock based compensation also decreased as approximately $10 million
was recognized on combination of OQI Sask in fiscal 2007.

Foreign Exchange Loss

Year ended April 30, 2009 as compared to year ended April 30, 2008. Foreign
exchange loss of $4,779,535 (2008 - gain of $440,636) resulted from holding
Canadian dollar cash in the parent company with a US dollar functional
currency when the value of the Canadian dollar declined as compared to the
U.S. dollar.

Year ended April 30, 2008 as compared to year ended April 30, 2007. Foreign
exchange gain of $440,636 (2007 - loss of $74,803) resulted from holding
Canadian dollar cash in the parent company with a US dollar functional
currency when the value of the Canadian dollar increased as compared to the
U.S. dollar.

Depreciation and accretion

Year ended April 30, 2009 as compared to year ended April 30, 2008.
Depreciation and accretion expense of $1,563,927 (2008 - $1,072,565) relates
to camp facilities, equipment and corporate assets. Accretion expense relates
to the asset retirement obligation recognized on the airstrip, camp site,
access road, and the reservoir test sites which are being brought into income
over a period of 10 to 30 years.

Year ended April 30, 2008 as compared to year ended April 30, 2007.
Depreciation expense of $1,072,565 (2007 - $367,827) relates to camp
facilities.

Interest income

Year ended April 30, 2009 as compared to year ended April 30, 2008. Interest
income of $1,089,483 (2008 - $2,468,694) was recognized in fiscal 2009 because
the Company had pre-funded its 2009 exploration and reservoir testing programs
resulting in cash on hand which was invested in short-term deposits. The
decrease in interest income is due to significant reductions in interest
rates.

Year ended April 30, 2008 as compared to year ended April 30, 2007. Interest
income of $2,468,694 (2007 - $1,530,720) was recognized in fiscal 2008 because
the Company had pre-funded its 2008 winter exploration resulting in cash on
hand which was invested in short-term deposits.

Income tax benefit

Year ended April 30, 2009 as compared to year ended April 30, 2008. The
deferred income tax benefit of $18,155,738 (2008 - $34,068,819) relates to the
tax benefit that is generated by expensing all exploration costs. This results
in a higher tax basis for the Company's capital assets when compared to their
carrying value. The deferred tax benefit otherwise reported is reduced by the
impact of flow through expenditures: the deferred tax benefit of which flows
through to subscribers. Drawdown of the flow through share premium liability
decreases the benefit. The net impact for the year was a reduction of the
deferred tax benefit in the amount of $4,742,834 (2008 - $6,189,768). The
deferred tax liability reported on the balance sheet is mainly related to the
book value of property which will not be deductible for tax purposes and is
related to the Company's 2006 acquisition of the non-controlling (minority)
interest in OQI Sask. Note 7 to the Financial Statements provides a complete
reconciliation of the income tax benefit reported to the amount that would be
expected from applying the combined Canadian federal and provincial income tax
rate of 27%.

Year ended April 30, 2008 as compared to year ended April 30, 2007. The income
tax benefit of $34,068,819 (2007 - ($107,580)) relates to the tax benefit that
is generated by expensing all exploration costs. This results in a higher tax
basis for the Company's capital assets when compared to their carrying value.
A similar recovery was not seen in 2007 as the majority of the tax benefits
realized on the exploration costs were renounced to share holders through the
issuance of flow-through shares. Note 7 to the Financial Statements provides a
complete reconciliation of the income tax recovery reported to the amount that
would be expected from applying the combined Canadian federal and provincial
income tax rate of 27%.

Non-controlling shareholder interest loss

Year ended April 30, 2009 as compared to year ended April 30, 2008. No
non-controlling interest loss was recognized in 2009 or 2008 as OQI acquired
the non-controlling interest in OQI Sask on August 14, 2006.

Year ended April 30, 2008 as compared to year ended April 30, 2007. No
non-controlling interest loss was recognized in 2008 (2007 - $4,722,083) as
OQI acquired the non-controlling interest in OQI Sask on August 14, 2006.

Share Capital
-------------

At June 19, 2009, the Company had 276,654,511 shares of common stock issued
and outstanding, 24,497,932 options to acquire shares of common stock, and
23,862,500 shares of common stock issuable pursuant to warrants outstanding.
The options have a weighted average exercise price of $4.14 per share and
6,325,000 of the warrants have an exercise price of $6.75 per share and the
remaining 17,537,500 warrants have an exercise price of $1.10.
At June 19, 2009, OQI's fully diluted shares of common stock outstanding was
363,847,746 (276,654,511 shares issued and outstanding plus 24,497,932
options, plus 23,862,500 warrants, plus Exchangeable Shares and options to
acquire exchangeable shares which can be exchanged into 37,444,235 shares,
plus 1,388,567 shares reserved for settlement with creditors of a former
subsidiary).
An Exchangeable Share provides the holder with economic terms and voting
rights which are, as nearly as practicable, equivalent to those of a share of
OQI common stock. The Exchangeable Shares are represented for voting purposes
in the aggregate by one Preferred Share. The one Preferred Share represents a
number of votes equal to the total outstanding Exchangeable Shares on the
applicable record date for the vote submitted to OQI shareholders.

About Oilsands Quest

Oilsands Quest Inc. (www.oilsandsquest.com) is exploring Canada's largest
holding of contiguous oil sands permits and licences, located in Saskatchewan
and Alberta, and developing Saskatchewan's first global-scale oil sands
discovery. It is leading the establishment of the province of Saskatchewan's
emerging oil sands industry.

Cautionary Statement about Forward-Looking Statements

This news release includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the U.S. federal securities
laws. All statements, other than statements of historical facts, included in
this news release that address activities, events or developments that our
management expects, believes or anticipates will or may occur in the future
are forward-looking statements. Such forward-looking statements include
discussion of such matters as:

- the amount and nature of future capital, development and exploration
expenditures;
- the timing of exploration activities;
- business strategies and development of our business plan and drilling
programs;
- potential reservoir recovery optimization processes.

Forward-looking statements are statements other than relating to historical
fact and are frequently characterized by words such as "plan" , "expect" ,
"project" , "intend" , "believe" , "anticipate" , "estimate" , "potential" ,
"prospective" and other similar words or statements that certain events or
conditions "may" "will" or "could" occur. Forward-looking statements such as
references to Oilsands Quest's drilling program, geophysical programs,
reservoir field testing and analysis program, preliminary engineering and
economic assessment program for a first commercial project, and the timing of
such programs are based on the opinions and estimates of management and the
company's independent evaluators at the date the statements are made, and are
subject to a variety of risks and uncertainties and other factors that could
cause actual events or results to differ materially from those anticipated in
the forward-looking statements, which include but are not limited to risks
inherent in the oil sands industry, regulatory and economic risks, lack of
infrastructure in the region in which the company's resources are located and
risks associated with the company's ability to implement its business plan.
The Company's views about the restatement, its remediation of a material
weakness in its controls, its financial condition, performance and other
matters also constitute "forward-looking statements" . These forward-looking
statements are subject to risks and uncertainties including, but not limited
to, the results and effect of the Company's review of its accounting
practices, potential delisting of our common stock on the NYSE Amex or cease
trade orders by regulatory authorities; potential claims and proceedings
relating to the adjustments to the Company's financial statements or its
accounting practices, including shareholder litigation and action by the SEC
or other governmental agencies which could result in civil or criminal
sanctions against the Company and/or certain of its current or former
officers, directors and/or employees; and negative tax or other implications
for the Company resulting from the accounting adjustments and other factors
detailed from time to time in the Company's filings under the Securities
Exchange Act of 1934. Many of these risks and uncertainties are beyond the
control of the Company. The Company undertakes no obligation to update
forward-looking statements if circumstances or management's estimates or
opinions should change, except as required by law. The reader is cautioned not
to place undue reliance on forward-looking statements.

SOURCE Oilsands Quest Inc.

Garth Wong, Chief Financial Officer Or Riyaz Mulji, Manager, Investor
Relations, Email: ir@oilsandsquest.com, Investor Line: 1-877-718-8941