Regal Energy Ltd.
TSX VENTURE : REG

Regal Energy Ltd.

February 28, 2007 16:37 ET

Regal Energy Announces First Quarter 2007 Results

CALGARY, ALBERTA--(CCNMatthews - Feb. 28, 2007) -

NOT FOR DISTRIBUTION IN THE UNITED STATES OF AMERICA

Regal Energy Ltd. (TSX VENTURE:REG) ("Regal" or the "Corporation") announces its financial (unaudited) and operating results for the first quarter ended December 31, 2006.

Highlights

- Completed flow-through commitments associated with 2005 financings.

- Drilled eight wells (4.9 net) resulting in seven natural gas wells (4.6 net) and one D&A well (0.3 net).

- Raised $2.4 million of equity through private placements financing and rights offering to shareholders and increased available credit facilities to $3.6 million.



Three Months Three Months
ended December ended December
31, 2006 31, 2005
(unaudited)

Financial (1)
Petroleum and natural gas sales $ 456,790 $ -
Funds flow from operations (non-GAAP) (2) $ (68,461) $ (44,460)
Net earnings (loss) $ (356,635) $ (44,460)
Capital expenditures (3) $ 3,743,911 $ 985,521
Working capital surplus (deficiency) $ (2,826,938) $ 5,581,826
Total assets $ 14,028,534 $ 17,213,515
Shareholders' equity $ 9,177,528 $ 14,913,286

Shares outstanding as of February 27, 2007 37,287,590 -
Shares issuable for warrants as of
February 27, 2007 2,973,733 -
Stock options outstanding as of
February 27, 2007 3,301,000 -

Operations
Production
Natural gas (Mcf) 52,969 -
Oil and NGLs (Bbls) 2,554 -
Total production (Boe) (4) 11,382 -

Natural gas (Mcf/d) 576 -
Oil and NGLs (Bbl/d) 28 -
Total production (Boe/d) (4) 124 -

Average selling price
Natural gas ($/Mcf) $ 6.10 -
Oil and NGLs ($/Bbl) $ 52.36 -
Total production ($/Boe) (4) $ 40.13 -

Notes:
(1) Effective with the takeover of Regal Energy Corp. on December 31, 2005,
the Corporation began receiving a revenue stream from crude oil and
natural gas sales. No comparative sales for the first quarter of fiscal
2006 are available.
(2) Funds flow before net change in non-cash operating working capital
balances does not conform to Generally Accepted Accounting Principles
(GAAP). Refer to the Advisory regarding "Non-GAAP Financial
Measurements" at the end of this news release.
(3) Amounts reported do not include amounts charged to capital as a result
of the takeover of Regal Energy Corp. on December 31, 2005. Non-cash
capital recorded for asset retirement obligations and is net of
dispositions.
(4) Natural gas is converted to oil equivalent at 6 Mcf = 1 Bbl. Refer to
the "Advisory Regarding Oil Equivalent Conversions" at the end of this
news release.


Regal had a very active and successful first quarter of fiscal 2007 resulting in increased land holdings, oil and gas reserves and production potential. Capital expenditures during the quarter totaled $4.4 million (before dispositions) including $3.3 million spent on drilling and completions, $0.5 million on acquisitions, $0.3 million on seismic and $0.3 million on facilities. A total of eight wells (4.9 net) were drilled resulting in seven natural gas wells (4.6 net) and one abandoned well (0.3 net). The necessary exploratory expenditures associated with previous flow-through financings remaining at the end of fiscal 2006 were completed prior to the end of December 2006. Four gas wells (3.2 net) are currently scheduled to be tied in within the next month and four additional gas wells (2.5 net) are expected to be completed and evaluated prior to spring breakup. The production from these wells is anticipated to generate increased funds flow and lead to a much improved financial performance for Regal.

During the first quarter, the directors and management of Regal took steps to ensure that the Corporation's financial condition would allow for a higher level of activity and expenditures. A total of $3.1 million was raised through private placements of shares, a rights offering to shareholders and the sale of a residual royalty interest on the Corporation's seismic database. Subsequent to the end of the first quarter, the Corporation raised additional gross proceeds of $0.7 million in connection with an over allotment option granted to the agent under the previous private placements. Regal's lender also increased the availability of the Corporation's credit facilities, following a review of first quarter drilling results. Regal intends to utilize these credit facilities for the completion and tie-in of several new wells during 2007.

At Garrington, Regal continued to strengthen its position and now holds interests in 16 sections of land, six producing gas wells (5.9 net), three completed gas wells (2.8 net) scheduled for tie-in and three cased gas wells (2.1 net) expected to be completed and evaluated for tie-in during the next two months. In October, Regal agreed to drill three further Mannville test wells to extend its main farm-in agreement at Garrington. Concurrent with the signing of this agreement, Regal secured a sub-participation and farm out agreement with a large oil and gas company to drill the three Mannville test wells on lands included in our main farm-in agreement and on lands acquired by Regal. The three test wells were recently drilled and cased as potential natural gas wells. With the completion of these wells, Regal earns shallow rights in additional lands and fulfills its commitment obligation under its main farm-in agreement. Regal is well positioned in the area with an expanding land base and inventory of drillable prospects.

During the first quarter, Regal announced new exploratory projects at Eight Mile, located near Fort St. John in northeast British Columbia, Pica in northwest Alberta and Hanna in east central Alberta. A total of four commitment wells (1.7 net) were drilled and cased in these new areas. Regal expects that it will be in a position to report on the completion results for these wells by the end of March 2007.

Anticipated production from eight new natural gas wells (5.7 net) and a strong inventory of drilling prospects on the Corporation's existing land base should enable Regal to attract the required capital to expand its exploration, development and acquisition efforts. Management looks forward to 2007 as a pivotal period in Regal's growth.

We encourage interested parties to access copies of the Corporation's 2007 Interim Financial Statements for the three months ended December 31, 2006 and the 2007 Quarterly Report, including Management's Discussion and Analysis, on the internet at www.sedar.com or Regal's website at www.regalenergy.ca.

ADVISORY REGARDING NON-GAAP FINANCIAL MEASUREMENTS

The Corporation has used certain measures of financial reporting that are commonly used benchmarks within the oil and natural gas industry in this news release that are considered to be non-GAAP measures. The measure used and referenced is "funds flow from operations". Regal determines funds flow from operations to be the cash flow before changes in non-cash working capital. Management believes that in addition to net earnings, funds flow from operations is a useful supplemental measure to assess the financial performance and ability of Regal to finance future spending. This measure is not defined under GAAP and should not be considered in isolation or as an alternative to conventional GAAP measures. This non-GAAP measure may not necessarily be comparable to similarly titled measures used by other entities and readers of this news release are cautioned in attempting to make such comparisons.

ADVISORY REGARDING OIL EQUIVALENT CONVERSIONS

Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwise stated. The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore Boe's may be misleading if used in isolation. (This conversion conforms to NI 51-101). References to natural gas liquids ("NGLs") in this news release include condensate, propane, butane and ethane and one barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe).

ADVISORY REGARDING FORWARD LOOKING STATEMENTS

Certain information regarding Regal set forth in this news release, including management's assessment of the Company's future plans, operations and operational results may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing, and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

Issued and Outstanding Common Shares: 37,287,590

The TSX Venture has not reviewed and does not accept any responsibility for the adequacy or accuracy of this release.

Contact Information

  • Regal Energy Ltd.
    Douglas O. McNichol
    President and Chief Executive Officer
    (403) 509-2581
    Email: dmcnichol@regalenergy.ca
    or
    Regal Energy Ltd.
    Wayne R. Wilson
    Vice President Finance and Chief Financial Officer
    (403) 509-2584
    Email: wwilson@regalenergy.ca
    or
    Regal Energy Ltd.
    Suite 1520, Life Plaza
    734 - 7th Avenue S.W.
    Calgary, Alberta T2P 3P8
    Website: www.regalenergy.ca