Regal Energy Ltd.

Regal Energy Ltd.

October 19, 2006 15:14 ET

Regal Energy Announces New Exploration Area, Rights Offering, Private Placement Financing, and Corporate Update

CALGARY, ALBERTA--(CCNMatthews - Oct. 19, 2006) -

Not for distribution in the United States of America

Regal Energy Ltd. (TSX VENTURE:REG) ("Regal" or the "Company") is pleased to announce a new exploration area, a rights offering, a private placement financing and corporate update.

Eight Mile Area, British Columbia Farm-in

Regal has agreed to participate in a natural gas prospect located in northeast British Columbia by way of farmin. The Company has entered into an Area of Mutual Interest ("AMI") covering 35 square miles of land in northeast BC, located south of Fort St. John, called the Eight Mile Prospect ("Eight Mile"). Regal has agreed to drill and complete two wells in the initial program with drilling to commence during October 2006. Regal will have a series of option wells following the drilling of the two commitment wells. The Farmor holds a 100% interest in 21 sections within the AMI and the majority of the farm-out lands are contiguous. Under the terms of the agreement, Regal will pay 40% of the Farmor's share of drilling and completion costs. For each earning well, Regal will earn 40% of the Farmor's working interest in the section, subject to a 12% convertible overriding royalty before payout and a 24% working interest after payout and a 24% working interest in a second contiguous section. Regal's share of equipping and tie in costs will be based on its after payout working interest. Drilling of the proposed locations will target natural gas in the Triassic Doig formation as the primary zone with secondary targets in the Charlie Lake and Halfway zones.

Rights Offering

The board of directors has authorized the Company to proceed with a rights offering to shareholders (the "Rights Offering") by way of rights offering circular. A draft rights offering circular has been filed with the applicable securities commissions and TSX Venture Exchange Inc. ("TSX Venture"). Further details regarding the Rights Offering will be provided once the Company has cleared all comments of the securities commissions on the rights offering circular and received the approval of TSX Venture. The Company expects that the gross proceeds from the Rights Offering will be used for general working capital purposes.

Private Placement

Regal also announces its intention to issue up to 4,583,333 Flow-Through Shares at $0.24 per Flow-Through Share, and a minimum of 5,000,000 Common Shares at $0.20 per Share (the "Private Placements"). Nova Bancorp Securities Ltd. will act as agent (the "Agent") for the Offering and in connection therewith will be paid a cash commission of 7% of the proceeds and will be granted agent's options to purchase up to 10% of the number of common shares issued at a price of $0.20 per share for 18 months. Insiders of Regal will subscribe for up to $100,000 of Flow-Through Shares. The expected gross proceeds of $2.1 million will be used to fund exploration and development of Regal's properties located in Alberta and British Columbia. Closing is expected to occur on or before November 15, 2006. The closing of the Private Placement is conditional on receipt of all necessary regulatory approval, completion of due diligence and the restructuring of the board of directors of Regal to appoint Richard Wlodarczak of Nova Bancorp to the board as Chairman. Harry Knutson, a director of Regal is an officer and director of Nova Bancorp and abstained from the approval process for the Private Placements.

In the event the Rights Offering results in gross proceeds of less than $1 million, the Agent has the right to sell an additional amount of Common Shares equal to the difference between $1 million and the gross proceeds of the Rights Offering.

Corporate Update

Regal's current production rate is 175 Boe/d comprised of 860 Mcf/d of natural gas and 32 Boe/d of oil and NGLs. The Company has scheduled the tie in of its fourth gas well at Garrington during the month of November 2006. The well was completed in the Edmonton zone and is expected to add 300 Mcf/d (50 Boe/d) of net production.

At Garrington, the Company recently participated in two Mannville tests. The first well was cased as a potential gas well and the Mannville zone is currently being completed with Regal's share of expenditures at 75% of the total. The second well in which Regal participated at a 25% working interest was dry and abandoned.

Regal is currently evaluating several other potential Mannville and Edmonton locations at Garrington with the intention of drilling the wells prior to the end of 2006. The Company recently engaged the services of a geological consultant with expertise in the Garrington area to assist with this work.

Pursuant to a flow-through financing completed on December 15, 2005, the Company is committed to spend $8 million on qualified exploration and development expenditures by December 31, 2006. The Company estimates that to date it has expended approximately $5.5 million relating to these commitments. The Company intends to incur the remaining $2.5 million amount by December 31, 2006 on its prospects at Garrington and the new Eight Mile area.

ADVISORY - Certain information regarding Regal set forth in this 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: 22,709,179

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
    Regal Energy Ltd.
    Wayne R. Wilson
    Vice President Finance and Chief Financial Officer
    (403) 509-2584
    Regal Energy Ltd.
    Suite 1520, Life Plaza
    734 - 7th Avenue S.W.
    Calgary, Alberta T2P 3P8