Admiral Bay Resources Inc.
TSX VENTURE : ADB

Admiral Bay Resources Inc.

May 16, 2006 15:16 ET

Admiral Bay Announces Completion of US$40,000,000 Credit Facility

DENVER, COLORADO--(CCNMatthews - May 16, 2006) - Admiral Bay Resources Inc. (TSX VENTURE:ADB) ("Admiral Bay" or the "Company") is pleased to announce the completion of a US$40,000,000 revolving credit facility from Macquarie Bank Limited of Sydney, Australia.

Admiral Bay and Macquarie Bank have entered into a US$40,000,000 senior first lien secured credit agreement dated May 16, 2006. Under the terms of the credit facility, Admiral Bay (USA), Inc., the Company's wholly owned subsidiary, (the "Subsidiary") has initial availability of US$15,000,000, with up to a further US$25,000,000 available subject to a borrowing base calculation including proved reserves from new wells drilled or acquired. The facility will have an interest rate that will float based on LIBOR and will initially be approximately 7.5% with the potential to increase based on the percentage of availability drawn. The maturity date under the credit agreement is April 30, 2010 and provides for the grant of various security interests, including a first lien on substantially all of the assets held by the Subsidiary. The Subsidiary will use the proceeds of the credit facility to expedite the development of its unconventional gas projects in the Cherokee Basin in southeastern Kansas and the Appalachian Basin in Pennsylvania.

As further consideration for the credit facility, the Company has granted Macquarie Bank a non-transferable share purchase warrant entitling Macquarie Bank to purchase up to 5,256,056 common shares of the Company at a price of $1.60 per until May 16, 2008. On May 8, 2006, the TSX Venture Exchange granted conditional acceptance of the credit facility and the warrant issued to Macquarie Bank, subject to filing final copies of documentation, issuance of this news release and payment of the balance of the Exchange's filing fees.

The Company also announces that the Board of Directors has adopted an amended and restated stock option plan. This will increase the number of common shares reserved under the plan for the grant of incentive stock options from 10% of the Company's issued and outstanding shares to a fixed number of 12,500,000 common shares, which represents approximately 17% of the Company's 72,386,586 shares currently outstanding.

In the current employment environment in the oil and gas industry, retaining qualified and experienced personnel is a challenge to most companies. In order to keep a cohesive management/development team in place over the coming years as the Company moves forward with its goal of developing into a mid-tier gas producer, the Board has granted options under the amended plan to officers and directors of the Company for the purchase up to an aggregate of 4,950,000 common shares at the price of $1.10 per share. These options will be exercisable for a period of five years, with the new options being subject to a four year vesting provision. Both the amended plan and the grant of the number of the new options that exceeds 10% of the Company's current outstanding shares are subject to the acceptance of the TSX Venture Exchange and ratification by the Company's disinterested shareholders at the next general meeting.

Admiral Bay Resources Inc. (www.admiralbay.com) is an emerging unconventional gas production company focused on the development of projects in the Cherokee Basin in southeast Kansas and the Appalachian Basin in Pennsylvania. Admiral Bay is listed on the TSX Venture Exchange under the symbol ADB.

About Macquarie Bank Limited

Macquarie Bank Limited is a diversified international provider of specialist financial and investment banking services with over 7,600 employees in 23 countries. Headquartered in Sydney, Australia, Macquarie Bank is listed on the Australian Stock Exchange and has a market capitalization of approximately US$10.7 billion (as at March 31, 2006). As at September 30, 2005 Macquarie Bank had total assets of US$85.3 billion and maintains credit ratings of F1/A+ (Fitch), P1/A2 (Moody's) and A1/A (Standard & Poor's).

Macquarie Bank provides debt and equity capital for independent oil and gas producers, and markets these services through its Representative Office in Texas. Macquarie Bank is not licensed to conduct banking business in the US.

Statements in this release that are not historical facts are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned that any such statements are not guarantees of future performance and that actual developments or results may vary materially from those in these "forward-looking statements".

The TSX Venture Exchange does not accept responsibility for the adequacy of this release

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