On January 30th, 2012, Township Petroleum Corporation, an Alberta corporation and wholly owned subsidiary of Oilsands Quest Inc. (the "Company"), entered into an asset purchase and sale agreement (the "Purchase and Sale Agreement" or the"PSA") with Fama Capital Ltd., an Alberta Corporation (the "Purchaser"), for the sale of "4-13-101: Sections 1-36, Oil Sands in all zones below the top of the Viking Formation", the assets described in the Company's filings with the Securities and Exchange Committee as the "Eagle's Nest Prospect" or "Eagles Nest" and associated assets (the "Assets"). The PSA was finalized in a bidding process subject to the jurisdiction of the Alberta Court of Queen's Bench (the "Court") under the Companies' Creditors Arrangement Act (Canada) (the "CCAA"). The Court approved the PSA and the transactions contemplated therein on February 22, 2011.

The PSA provides for the sale of the Assets for a purchase price of CDN$7,000,000 (the "Purchase Price"), exclusive of GST. The Purchaser previously paid a CDN $50,000 deposit and is required to pay an additional deposit of CDN $350,000 on or before February 24, 2012. The additional deposit was not received, and the PSA terminated on February 27, 2012 pursuant to Section 14.1 thereof. Closing under the PSA is scheduled to occur on or before March 23, 2012.

The PSA provides for access, subject to contractual restrictions relating to disclosure, to all technical data relating to the Assets that are reasonably required in connection with the PSA. The PSA is subject to ordinary closing conditions, including the receipt by each party of an officer's certificate certifying that the representations and warranties of the party are true and correct in all material respects at the time of closing, the execution of a general conveyance for the Assets, and the obtaining of all necessary governmental or regulatory approvals for the sale of the Assets.

This summary of the PSA is qualified in its entirety by reference to the PSA, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.

On February 23, 2012, the Company issued a press release announcing that it received approval from the Court for the Purchase and Sale Agreement for the Assets. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein. The press release is also available on the Company's website at www.oilsandsquest.com.