Regal Energy Ltd.

Regal Energy Ltd.

November 21, 2005 09:30 ET

Regal Energy Announces Third Quarter 2005 Financial and Operating Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 21, 2005) -

(Not for dissemination in the United States of America)

Regal Energy Corp. (TSX VENTURE:RGN) ("Regal" or the "Company") announces its financial (unaudited) and operating results for the quarter and nine months ended September 30, 2005.

Three Months ended Nine Months ended
September 30, September 30,
(unaudited) 2005 2004 2005 2004

Petroleum and natural
gas sales (1) $ 631,615 $ 269,152 $ 1,655,304 $ 577,228
Cash flow from
operations (2) $ (72,163)$ (8,290) $ (72,100) $ (44,378)
Net Earnings (loss) $(190,151)$ (87,360) $ (589,663) $(263,922)
Capital expenditures (3) $ 425,645 $ 143,861 $ 1,878,814 $ 2,572,514
Working capital surplus
(deficiency) $(1,276,337)$ 388,373
Total assets $ 5,408,940 $ 3,218,471
Shareholders' equity $ 3,270,710 $ 2,646,482

Shares outstanding as
of November 21, 2005 29,749,841
Shares issuable for
warrants as of
November 21, 2005 1,641,334
Stock options outstanding
as of November 21, 2005 2,075,000

Natural gas (Mcf) 11,322 22,061 52,820 22,061
Oil and NGLs (Bbls) 9,245 2,494 27,950 3,553
Total production
(Boe) (4) 11,132 6,171 36,753 7,230

Natural gas (Mcf/d) 123 222 193 155
Oil and NGLs (Bbl/d) 100 30 102 23
Total production
(Boe/d) (4) 121 67 135 49

Average selling price
Natural gas ($/Mcf) 9.29 6.23 7.51 6.55
Oil and NGLs ($/Bbl) 56.94 50.87 45.03 47.14
Total production
($/Boe) (4) 56.74 43.46 45.04 43.00

Operating Netback
($/Boe) (4) 8.56 23.55 12.30 23.66

(1) Net of transportation costs.
(2) Cash flow before net change in non-cash operating working capital
balances does not conform to Generally Accepted Accounting
Principles (GAAP). Refer to the Net Earnings and Cash Flow from
Operations section of the Management's Discussion and Analysis.
(3) Includes amounts allocated to capital as a result of the acquisition
of Thunder Road Resources Ltd. in 2005 as well as amounts allocated
to capital in 2004 as a result of the booking of the Qualifying
(4) Natural gas is converted to oil equivalent at 6 Mcf = 1 Bbl. A Boe
conversion ratio of 6 Mcf = 1 Bbl is based on an energy equivalency
conversion method and does not represent a value equivalency at the
wellhead; therefore Boe's may be misleading if used in isolation.

The management and directors of Regal recognize the need for the Company to increase its size in order to compete in the capital-intensive oil and gas industry and generate a profitable return for shareholders. Regal recently announced a proposed merger with Azeri Capital Inc. ("Azeri") through a Plan of Arrangement (the "Arrangement"). Azeri will bring over $6 million of cash, $55 million of tax pools and a significant seismic joint venture to the merger. The seismic underlying the joint venture consists of the majority of the proprietary seismic data of a senior Canadian integrated oil and gas company and includes over 32,000 kilometres of 2D data covering several areas throughout Alberta and Saskatchewan.

The Arrangement provides the opportunity for Regal's shareholders to participate in a well capitalized company under the leadership of Regal's existing management team. Regal shareholders will have the opportunity to participate in the future growth of a larger entity with substantial tax pools, a significant seismic database and a broader range of prospects. Once the Arrangement is complete, the Company will own one copy of the seismic data and will have the right to 20% of the line sales for a period of five years. Shareholders of Azeri and Regal will be asked to consider the Arrangement at special meetings expected to be held on December 29, 2005, with closing expected to occur on December 31, 2005.

During the third quarter of 2005, Regal's corporate production averaged 121 Boe/d, 79 percent higher than the third quarter of 2004 but 9 percent lower than the second quarter of 2005. During the quarter Regal shut in two of its heavy oil wells at Atlee Buffalo due to uneconomic performance. These two wells may be worked over and returned to production at a future date however at the present time the Company is allocating its capital to more attractive projects. In late August an extensive workover was required to repair the casing in Regal's main heavy oil producer. This resulted in a loss of production and contributed to approximately 35% of additional operating costs for the third quarter. High operating costs also resulted from service work on two wells and a battery turnaround at the Veteran property. The Company's two gas wells at Atlee Buffalo were shut in for approximately eight weeks to allow for gas plant modifications. The two wells were reactivated in late September however the shut-in period resulted in a 46% reduction in gas production during the third quarter versus the second quarter of 2005.

Regal and Azeri have entered into a farmin agreement, pursuant to which Azeri will farmin to certain prospects of Regal and will pay for the majority of Regal's drilling, completion and testing costs. Regal and Azeri are proceeding to drill four prospects, including locations for Glauconitic oil and Viking gas at Atlee Buffalo, a Mannville oil location at Sounding Lake, and a Gething/Viking gas location at Kaybob, all in Alberta. The two locations at Atlee Buffalo are development wells that offset existing producers and the Sounding Lake location will offset a previously drilled well that encountered oil pay in two zones. At Kaybob, a pooling has been agreed to with three senior oil and gas companies for the drilling and production of a natural gas well. The planned location is immediately adjacent to a previously drilled well completed in a lower formation. Logs indicate two zones with bypassed gas pay in the Cretaceous Viking and Gething formations.

In addition to these proposed drilling activities, Regal is actively exploring in a new focus area located in the general Garrington/Sylvan Lake area of west-central Alberta. Regal has identified a number of prospects targeting natural gas and light oil and is pursuing farmin and land acquisition opportunities in the area.

Completion of the Arrangement is subject to a number of conditions, including but not limited to, TSX Venture acceptance and shareholder approval, if required. The Arrangement cannot close until the required shareholder approval, if required, is obtained. There can be no assurance that the Arrangement will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the disclosure document to be prepared in connection with the Arrangement, any information released or received with respect to the Arrangement may not be accurate or complete and should not be relied upon. Trading in the securities of Regal should be considered highly speculative.

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Neither Azeri nor Regal will update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Regal and Azeri.

Issued and Outstanding Common Shares: 29,749,841

The TSX Venture Exchange Inc. has in no way passed upon the merits of the Arrangement and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Regal Energy Corp.
    Douglas O. McNichol
    President and Chief Executive Officer
    (403) 509-2581
    Regal Energy Corp.
    Wayne R. Wilson
    Vice President Finance and Chief Financial Officer
    (403) 509-2584
    Regal Energy Corp.
    Suite 1520, Life Plaza
    734-7th Avenue S.W.
    Calgary, Alberta T2P 3P8