UNDERGROUND ENERGY CORPORATION ANNOUNCES

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					         UNDERGROUND ENERGY CORPORATION ANNOUNCES 2011 FINANCIAL RESULTS

April 25, 2012 – Santa Barbara, California – Underground Energy Corporation (“Underground”, “UGE” or the
“Company”) (TSX VENTURE SYMBOL: UGE) today announced its financial results for the year ended
December 31, 2011. All amounts are in US dollars unless otherwise noted and these results have been
prepared in accordance with International Financial Reporting Standards (“IFRS”).

Recent Highlights

Highlights for the quarter ended December 31, 2011 include:
    •   Closing of a transaction which significantly increased the Company’s California acreage to 38,005 net
        acres through the acquisition of 30,152 net acres, including two producing oil wells with total
        production of approximately 65 bopd, a producing gas well, a number of drill ready locations and
        multiple exploitation and exploration prospects in the Santa Maria and San Joaquin Basins. Total
        consideration was US$5.5 million, comprising $4.6 million in cash and $0.9 million in assumed
        liabilities;
    •   Purchasing and reprocessing existing seismic data as well as acquiring more than 30 miles of new 2D
        swath seismic data over the recently acquired Zaca Field Extension area; and
    •   Acquiring and processing 10 miles of new 2D swath seismic data over the Asphaltea prospect.

Highlights subsequent to year-end include:
    •   Renewing permits for two drill pads and six well locations at the Zaca Extension Project;
    •   Entry into an agreement with Key Energy Services to secure a drilling rig for the initial portion of the
        Company's 2012 drilling program comprising a minimum of five wells with an option for an
        additional five wells;
    •   Spudding and drilling the Chamberlin 4-2 well, the initial well drilled by the Company at its recently
        acquired 6,200 net acre Chamberlin lease in the Zaca Field Extension Project (“Zaca”) in Santa
        Barbara County, California, to a total depth of 6,679 feet;
    •   Encouraging initial results from the Chamberlin 4-2 well which encountered oil shows in a number of
        sections and, in particular, penetrated more than 900 feet of continuous, strong oil shows in a
        section of Monterey consistent with the most productive sections at the existing Zaca field and
        elsewhere in the Santa Maria Basin; and
    •   Receipt of the year-end reserve evaluation conducted by GLJ Petroleum Consultants Ltd. (“GLJ”) of
        Calgary, the Company’s independent reserve engineers, dated April 12, 2012 and evaluating the
        Company’s proved, probable, and possible reserves as at December 31, 2011 in accordance with the
        Canadian standards and requirements of National Instrument 51-101 – Standards of Disclosure for
        Oil and Gas Activities.

“In the fourth quarter we successfully completed a transaction that allowed us to substantially increase our
land position in California and provided us with a number of near-term development and exploration
opportunities,” said Michael Kobler, President and CEO of Underground. “Immediately following the closing
of the transaction, we moved rapidly to shoot new seismic at Zaca and to complete preparations for our
2012 drilling program, culminating in the spudding of our first well in February 2012. We also secured an
independent third party reserve report as at December 31, 2011 which validates the purchase price of the
assets acquired and provides a solid base from which we will grow as our drilling and seismic programs
continue. Through the early part of 2012 our entire team has worked to aggressively advance our
exploration program and we will continue to implement our initial five well drilling program through the
balance of 2012 and to build upon the encouraging results from our initial well (Chamberlin 4-2). These
                                                        -2-


activities highlight our strategy to de-risk the company by diversifying the asset base, from primarily
exploration prospects to also include lower risk drilling of offset development wells.”

Financial Review                                                       As at                  As at
                                                              December 31, 2011    December 31, 2010
Cash and cash equivalents                                            14,646,951                427,730
Property, plant and equipment                                         5,138,369                 39,688
Exploration and evaluation assets                                     5,377,653                443,497
Total assets                                                         27,519,369              1,103,985
Long term liabilities                                                    99,012                      -

                                                               12 months ended      12 months ended
                                                              December 31, 2011    December 31, 2010
Net loss                                                             10,164,978              1,917,560
Net loss per share – basic & diluted                                      (0.08)                (0.04)

Cash and Cash Equivalents

As a development stage company, Underground constantly consumes cash for its operating activities and for
its investing activities. During the first half of the year shareholders provided financial support by
purchasing common stock and warrants amounting to $6,529,880, net of issuance costs. During the third
quarter the Company closed a $25,499,300 brokered private placement transaction ($23,364,124 after
issuance costs).

Business Combination
Effective October 1, 2011, the Company acquired working interests ranging from 70% to 80% in projects
comprising 30,151 net acres of oil and gas leases in California. With this acquisition, the company acquired
three producing wells and multiple exploitation and exploration prospects in the San Joaquin and Santa
Maria basins in California. As at the date of this announcement, two of the three wells acquired are out of
service.
In the three months to December 31, 2011, the working interests contributed revenue of $0.2 million and
losses of $0.9 million. The Company has moved to rationalize and improve the operations acquired.
Identifiable assets acquired and liabilities assumed:


Property, plant and equipment                                                        $     3,482,661
Exploration and Evaluation assets                                                          1,952,656
Joint venturers’ share of pipeline liability                                                 372,766
Pipeline liability assumed                                                                (1,263,185)
Decommissioning liability assumed                                                            (99,012)
Other                                                                                        178,198
Total cash consideration                                                                 $ 4,624,084
No goodwill was identified in this transaction, as the cash amount paid is the same as the sum of the
identifiable assets and liabilities.
                                                    -3-


Property Plant and Equipment

Property Plant and Equipment (“PP&E”) assets increased by approximately $5,099,000 during the year. The
net increase in PP&E assets was due primarily to acquisitions of oil leases with production in the California
Monterey shale of $3,483,000; geological and geophysical work and lease acquisitions at the Zaca Extension
project of $1,258,000, annual lease payments and other items that totaled $53,000 and corporate asset
additions of $422,000, offset by depletion and depreciation totaling $117,000.

Exploration and Evaluation Assets

Exploration and Evaluation (“E&E”) assets increased by approximately $4,934,000 during the year. The net
increase in E&E assets was due primarily to oil and gas lease acquisitions in California of $1,953,000;
geological and geophysical work at various California projects of $1,880,000, of which $1,540,000 was
invested in Asphaltea seismic acquisition and analysis; other oil and gas lease acquisitions and expenditures
totaling $1,244,000; and annual lease payments and other items that totaled $355,000. This spending,
totaling $5,432,000, was offset by impairment provisions of $496,000 and a disposition of $2,000 for a net
increase of $4,934,000.
Net Loss                                                                             Twelve Months
                                                                                  Ended December 31
                                                                                   2011       2010
Oil and natural gas revenue                                                     197,738               -
Other income                                                                     47,925               -
                                                                                245,663               -
Production and operating expense                                                468,458              -
Exploration and evaluation expense                                            1,562,019      1,006,233
Administrative expense                                                        7,526,197        913,773
Other expense                                                                   738,334              -
Operating loss                                                               10,004,345      1,920,006
Net finance expense (income)                                                        991         (2,446)
Loss before loss of equity accounted investments                             10,050,336      1,917,560
Loss of equity accounted investments                                            114,642               -
Loss and comprehensive loss for the year                                     10,164,978      1,917,560

Net Loss increased by $8,247,400 compared to last year due to the acquisition of a public listing on the TSXV
and due to the build-out of the Company as it developed its oil and gas prospects and increased its land
acquisition activities, including:

       Oil and natural gas revenue and production and operating expense increased by $197,738 and
        $468,458, respectively, due to the acquisition of three producing wells that were included in the oil
        and gas lease acquisition that closed during the fourth quarter of 2011;
       Exploration and evaluation expense increased by $556,000 compared to last year primarily due to
        $496,000 in impairments of various properties: $204,000 relates to the costs incurred on the
        Mustang Flats seismic option prospect in Nevada, the rights to which the Company quit claimed
        early in 2012 after completion of seismic evaluation, $2,000 relates to money expended in 2011 on
        an unsuccessful attempt to recomplete a gas well acquired with the large purchase of leases in the
        fourth quarter, $250,000 relates to the Chu Chua mineral property acquired as part of the merger
        during the third quarter, and $40,000 with respect to the NW Casmalia property during the second
                                                    -4-


        quarter of 2011. Other factors in the increase, totaling $60,000, are due to the increased level of
        exploration and evaluation activities – being software and general office expenses;
       Administrative expense increased by $6,612,000 compared to last year primarily due to the
        $2,867,000 cost of acquiring a listing on TSXV; $440,000 increased professional fees related to the
        merger with Shenul and becoming a TSXV listed company; $1,700,000 increased personnel cost due
        to the addition of a fulltime executive team and support staff; $379,000 increase in legal, audit and
        other professional fees apart from the merger with Shenul; $328,000 increased directors’
        compensation; and $405,000 increased office, insurance and miscellaneous expenses; $324,000
        increased travel and accommodation expenditures related to exploring financing alternatives;
        $153,000 in investor relations fees and related charges and an increase of $48,000 in depreciation of
        corporate PP&E. Those increases were partially offset by a $32,000 warrant liability mark-to-market
        adjustment; and
       Other expense increased by $738,000 and represents the Company’s provision for all of the net
        billings to its joint interest partners since the acquisition of leases early in the fourth quarter
        ($428,000) and the joint interest partners’ share of future payments under a pipeline financing
        arrangement ($310,000).

Outlook

The Company is focussed on the drilling program currently underway at its Zaca Extension Project, where its
initial well (Chamberlin 4-2) encountered 900 feet of continuous strong oil shows in a new fault block (the
"Chamberlin East Block”). The Company’s second well (Chamberlin 3-2) is directly targeting the newly
discovered Chamberlin East Block and the Company will look to production test and then produce oil from
this new block. Thereafter, the Company will look to add further production at Zaca as it continues to
implement its 2012 drilling program. At the same time, it will continue to process and acquire additional
seismic at Zaca and its other core assets.

To view the Company’s Year End 2011 Consolidated Financial Statements, related Notes to the Consolidated
Financial Statements, Management’s Discussion and Analysis and Annual Information Form, please see the
Company’s annual filings which will be available on www.sedar.com.

About Underground Energy Corporation

Underground Energy is focused on identifying, acquiring rights to, exploring for, developing and producing
oil reserves from shale formations in North America using the latest exploration and recovery techniques
and technologies. Underground focuses on identifying and acquiring sizable land positions and prospects in
historically prolific but under-explored shale formations as well as in emerging shale plays that, in both
instances, hold large volumes of prospective resources. Underground currently holds hydrocarbon rights on
approximately 69,291 net acres of highly prospective lands in California and Nevada with an initial focus on
the Monterey shale in California. Underground is listed on the TSX Venture Exchange under the ticker
symbol “UGE”. For more information on Underground, including a copy of the Company’s latest corporate
presentation, please visit www.ugenergy.com. Underground’s regulatory filings are available under the
Company’s profile at www.sedar.com.

Cautionary Statements

Statements in this press release contain forward-looking statements and forward-looking information
within the meaning of applicable securities law (collectively, "forward-looking information"). Forward-
looking information is frequently characterized by words such as "plan", "expect", "project", "intend",
"believe", "anticipate", "estimate" and other similar words, or statements that certain events or
                                                     -5-


conditions "may" or "will" occur. In particular, forward-looking information in this press release includes,
without limitation, statements with respect to the Company’s continuation of its 5 well drilling program
and the Company's growth strategy and anticipated activities under the heading "Outlook" above.

Although the Company believes that the expectations and assumptions reflected in the forward-looking
information are reasonable, there can be no assurance that such expectations or assumptions will prove
to be correct. In particular, assumptions have been made that: (i) Underground will be able to obtain
equipment, qualified staff and regulatory approvals in a timely manner to carry out its planned
exploration and development activities; (ii) Underground will have sufficient financial resources with
which to conduct its planned capital expenditures; and (iii) the current regulatory and tax regime will
remain substantially unchanged. Readers are cautioned that assumptions used in the preparation of
forward-looking information may prove to be incorrect. Consequently, there is no representation that the
actual results achieved will be the same, in whole or in part, as those set out in the forward-looking
information.

Forward-looking information is based on the opinions and estimates of management at the date the
statements are made, and are subject to a variety of risks and uncertainties and other factors (many of
which are beyond the control of Underground) that could cause actual events or results to differ materially
from those anticipated in the forward-looking information. Some of the risks and other factors could
cause results to differ materially from those expressed in the forward-looking information include, but are
not limited to: general economic conditions in Canada, the United States and globally, the risks associated
with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks could
include, but are not limited to: operational risks in exploration, development and production; delays or
changes in plans; competition for and/or inability to retain drilling rigs and other services; competition for,
among other things, capital, acquisitions of reserves, undeveloped lands, skilled personnel and supplies;
risks associated to the uncertainty of reserve estimates; governmental regulation of the oil and gas
industry, including environmental regulation; geological, technical, drilling and processing problems and
other difficulties in producing reserves; the uncertainty of estimates and projections of production, costs
and expenses; unanticipated operating events or performance which can reduce production or cause
production to be shut in or delayed; incorrect assessments of the value of acquisitions; the need to obtain
required approvals from regulatory authorities; stock market volatility; volatility in market prices for oil
and natural gas; liabilities inherent in oil and natural gas operations; access to capital; and other factors.
Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking information contained in this news release is expressly qualified by this cautionary
statement. Underground does not undertake any obligation to update or revise any forward-looking
statements to conform such information to actual results or to changes in our expectations except as
otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance
on forward-looking information.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


For further information please contact:

Peter Ballachey                                            Simon Clarke
Chief Financial Officer                                    Vice President, Corporate Development
Underground Energy Corporation                             Underground Energy Corporation
Tel: 805-845-4700 x 17                                     Tel: 604-551-9665
                                               -6-



UNDERGROUND ENERGY CORPORATION
Consolidated Balance Sheets

(in US dollars)

                                                December 31, December 31,                 January 1,
                                                       2011         2010                       2010

Assets
    Cash and cash equivalents                        $ 14,646,951   $     427,730     $     309,267
    Restricted cash                                     1,077,260               –                 –
    Accounts receivable                                   302,422           4,818                 –
    Prepaid expenses and deposits                         653,370          19,243             9,016
    Loans receivable                                      167,970               –                 –
    Total current assets                               16,847,973         451,791           318,283

    Investments                                          155,374          169,009           135,000
    Property, plant and equipment                      5,138,369           39,688            50,763
    Exploration and evaluation assets                  5,377,653          443,497           224,100
    Total non-current assets                          10,671,396          652,194           409,863

Total assets                                         $ 27,519,369   $ 1,103,985       $     728,146


Liabilities
    Accounts payable and accrued liabilities         $ 3,144,624    $     561,214     $      85,118
    Warrant liability                                    448,000                –                 –
    Total current liabilities                          3,592,624          561,214            85,118

    Decommissioning obligations provision                 99,012                –                 –
Total liabilities                                      3,691,636          561,214            85,118


Equity
    Share capital                                    37,590,330          5,028,198         3,403,315
    Share-based payment reserve                        1,324,286           433,625           241,205
    Deficit                                          (15,086,883)       (4,919,052)       (3,001,492)
    Total equity                                      23,827,733           542,771           643,028

    Commitments and contingencies
    Subsequent events

Total equity and liabilities                         $ 27,519,369   $ 1,103,985       $     728,146
                                                   -7-



UNDERGROUND ENERGY CORPORATION
Consolidated Statements of Comprehensive Loss

(in US dollars)

                                                                      Year Ended December 31
                                                                   2011                2010


Revenues
Oil and natural gas revenue                              $       197,738         $           –
Other income                                                      47,925                     –

                                                                 245,663                     –

Expenses
Production and operating                                       468,458                       –
Exploration and evaluation                                   1,562,019               1,006,233
Administrative                                               7,526,197                 913,773
Other expenses                                                 738,334                       –

                                                             10,295,008              1,920,006

Operating Loss                                               10,049,345              1,920,006

Finance income                                                    26,408                 2,446
Finance expense                                                   27,399                     –
Net finance expense (income)                                         991                (2,446)

Loss Before Loss of Equity Accounted Investments             10,050,336              1,917,560

Share of loss of equity accounted investments                    114,642                     –

Loss and comprehensive loss for the year                 $10,164,978             $ 1,917,560

Loss per share:
   Basic and diluted                                         $    (0.08)         $      (0.04)




                                                    .
                                                                -8-



UNDERGROUND ENERGY CORPORATION
Consolidated Statements of Changes in Equity
(in US dollars)



                                              Number                                         Share-
                                                    of                                       based
                                              ordinary                        Share        payment                              Total
                                               shares                         capital       reserve         Deficit            equity

Balance at January 1, 2010                 45,075,496                    $ 3,403,315 $     241,205 $ (3,001,492)      $       643,028
Issue of ordinary shares                   11,258,840                      1,624,883             –            –             1,624,883
Share-based payments                                –                              –       192,420            –               192,420
Loss for the year                                   –                              –             –   (1,917,560)           (1,917,560)

Balance at December 31, 2010               56,334,336                    $ 5,028,198 $     433,625 $ (4,919,052)      $      542,771



Number of shares has been adjusted to reflect the reverse takeover




                                              Number                                         Share-
                                                    of                                       based
                                              ordinary                        Share        payment                              Total
                                               shares                         capital       reserve         Deficit            equity

Balance at December 31, 2010               56,334,336                $    5,028,198 $      433,625 $ (4,919,052)      $      542,771
Issue of ordinary shares                  134,440,376                    32,177,450              –            –           32,177,450
Share issuance costs, net of
   tax of $nil                                      –                     (2,283,446)             –              –         (2,283,446)
Options exercised                           1,477,667                         54,528        (10,500)             –             44,028
Shenul Capital Inc. shares
   outstanding brought forward
   upon merger                              9,900,000                              –              –              –                  –
Net assets of Shenul Capital Inc.
   acquired upon merger                              –                    2,613,600         42,667               –          2,656,267
Share-based payments                                 –                            –        858,494               –            858,494
Non-cash dividends paid                              –                            –              –          (2,853)            (2,853)
Loss for the year                                    –                            –              –     (10,164,978)       (10,164,978)

Balance at December 31, 2011              202,152,379                $ 37,590,330       $ 1,324,286 $ (15,086,883)    $ 23,827,733


Number of shares has been adjusted to reflect the reverse takeover
                                                   -9-



UNDERGROUND ENERGY CORPORATION
Consolidated Statements of Cash Flows

(in US dollars)

                                                                          Year Ended December 31
                                                                 2011                      2010

Cash flows from operating activities:
Loss for the year                                        $ (10,164,978)             $       (1,917,560)
Adjustments for:
  Share of loss of equity accounted investments                114,642                              –
  Depletion, depreciation and amortization                     116,735                         21,881
  Impairment losses on exploration and
     evaluation assets                                         496,082                               –
  Joint venturers’ share of pipeline obligation                372,766                               –
  Gain on sale of exploration and evaluation
     assets                                                    (47,925)                             –
  Non-cash TSX-V listing expense                             2,867,096                              –
  Share-based compensation                                     773,619                        192,420
  Warrant liability, mark-to-market adjustment                 (32,000)                             –
  Net finance expenses (income)                                    991                         (2,446)
  Foreign exchange                                              (8,730)                         1,064
  Interest paid                                                (18,668)                             –
Change in non-cash working capital,
  operating activities                                         414,829                         461,051
Net cash used in operating activities                       (5,115,541)                     (1,243,590)

Cash flows from investing activities:
  Additions to property, plant and equipment                (1,732,755)                       (10,806)
  Additions to exploration and evaluation assets            (3,101,868)                      (219,397)
  Acquisition of oil and gas leases                         (4,624,084)                             –
  Proceeds from sale of exploration and
     evaluation assets                                          50,000                               –
  Investment in Careaga Sand and Asphalt
     Company                                                    (2,853)                             –
  Investment in restricted cash                             (1,077,260)                             –
  Interest income received                                      26,407                          1,382
  Increase in investments                                     (101,007)                       (34,009)
  Cash acquired from Shenul                                      2,817                              –
Net cash used in investing activities                      (10,560,603)                      (262,830)

Cash flows from financing activities:
  Proceeds from issue of share capital                      32,134,783                      1,627,000
  Share issuance costs                                      (2,283,446)                        (2,117)
  Proceeds upon exercise of options                             44,028                              –
Net cash from financing activities                          29,895,365                      1,624,883

Change in cash and cash equivalents                         14,219,221                        118,463

Cash and cash equivalents beginning of year                    427,730                        309,267

Cash and cash equivalents end of year                      $ 14,646,951                 $     427,730

				
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