Oilsands Quest Inc. announces $60 million rights offering open to all stockholders to finance its exploration and development plans

CALGARY, July 18, 2011 /CNW/ --
CALGARY, July 18, 2011 /CNW/ - Oilsands Quest Inc. (NYSE Amex: BQI)
('Oilsands Quest,' 'OQI' or 'the Company'), announced today that the
company is launching a rights offering in which all holders of common
stock on July 28, 2011 (the 'Record Date') may participate on an equal,
proportional basis in purchasing additional common shares. Each holder
of Oilsands Quest's common stock on the Record Date will receive 0.861
subscription rights per share of common stock held, for a total of
300,000,000 rights. The subscription price per full share of common
stock of Oilsands Quest Inc. is $0.20, which is a 40% discount to the
closing sale price on July 18, 2011.

The rights offering, if fully subscribed, will raise gross proceeds of
approximately $60 million. The net proceeds from the rights offering
will be used to operate the planned pilot project at Axe Lake in order
to demonstrate that the Axe Lake reservoir can be produced using proven
steam-assisted gravity drainage (SAGD) technology, advance the Wallace
Creek project through additional delineation programs, continue with
the core hole re-abandonment program at Axe Lake and for general
corporate purposes.

Holders of exchangeable shares that are exchangeable for shares of
common stock will not receive rights for the exchangeable shares,
unless such shares have been exchanged for shares of common stock by
July 25, 2011. Rights may only be exercised for whole shares; no
fractional shares of common stock will be issued in the rights
offering. No person may acquire shares in the rights offering such that
the person would own more than 19.9% of the then outstanding common
shares of Oilsands Quest upon completion of the rights offering, unless
such limitation is waived by the Company. The Company expects to mail a
rights certificate and a prospectus supplement to each U.S. shareholder
and eligible Canadian holders on or about August 1, 2011. Holders
resident in the province of Quebec will not be entitled to participate.

The rights will be exercisable for at least 14 days from the date of
mailing to shareholders and the rights offering is currently expected
to close on August 15, 2011, subject to the Company's right to extend
the rights offering period.

Each shareholder has been issued a number of rights sufficient to
maintain its current ownership percentage of the Company if it chooses
to participate in the rights offering.  A shareholder who does not
exercise its rights will have its current ownership percentage in
Oilsands Quest (but not the actual number of shares of common stock)
reduced as a result of the rights offering to the extent other
shareholders participate.

Shareholders who exercise their rights in full will be entitled to
subscribe for additional shares of common stock, as part of their
over-subscription right. In the event that any of the shares are not
purchased by other holders of subscription rights under their basic
subscription privileges as of the expiration date, the
over-subscription right allows rights holders who have exercised their
basic subscription rights in full to subscribe for an additional number
of shares of common stock on a pro rata basis, subject to the overall
ownership limitation.

Shareholders who do not wish to exercise their rights to buy shares of
common stock will have the option of selling the rights that they
receive from the company through the NYSE Amex, where the rights will
trade for at least 10 days, commencing on August 2, 2011. Unless
extended, the last trading day for the rights on the NYSE Amex will be
August 12, 2011. An application has been submitted to the NYSE Amex to
list the shares of common stock issuable upon the exercise of the
rights.

Knight Capital Americas, L.P. ('Knight') has been appointed dealer
manager for the rights offering in the U.S.

Full details of the rights offering will be disclosed in the prospectus
supplement sent to Oilsands Quest shareholders as of the Record Date.

This news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of these securities in any state or jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration of
qualification under the securities laws of any such state or
jurisdiction.

Oilsands Quest has filed a registration statement (including a
prospectus) with the SEC for the offering to which this communication
relates. Before investing, individuals should read the prospectus in
that registration statement, the other documents Oilsands Quest has
filed with the SEC, and the prospectus supplement we will file with the
SEC for more complete information about us and this rights offering.
The documents are available free of charge by visiting EDGAR on the SEC
website at www.sec.gov. Alternatively, Georgeson, Inc. will arrange to send you the prospectus
if you request it by calling toll-free 1-888-613-9988.

About Oilsands Quest

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




Forward-looking statements:

This news release includes certain statements that may be deemed to be
'forward-looking statements.' All statements, other than statements of
historical facts, included in this free writing prospectus 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 Company's plans to raise additional capital;

    --  implementation of the Company's business plan;

    --  the amount and nature of development and exploration
        expenditures;

    --  the timing of exploration and development activities;

    --  potential reservoir recovery optimization processes; and

    --  business strategies and development of our business plan and
        drilling programs.

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 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 the
ability to raise additional capital, risks associated with the
Company's ability to implement its business plan, risks inherent in the
oil sands industry, regulatory and economic risks, land tenure 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 undertakes no obligation to
update forward-looking information 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.

To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/July2011/18/c6101.html

Investor Relations
Email: ir@oilsandsquest.com
Investor Line: 1-877-718-8941