Regal Energy Ltd.

Regal Energy Ltd.

August 18, 2006 09:30 ET

Regal Energy Announces Third Quarter 2006 Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 18, 2006) -

Not for distribution in the United States of America

Regal Energy Ltd. ("Regal" or the "Company") (TSX VENTURE:REG) announces its financial (unaudited) and operating results for the third quarter ended June 30, 2006.

Three Months Nine Months
ended ended
(unaudited) June 30, 2006 June 30, 2006

Financial (1)
Petroleum and natural gas sales $ 321,021 $ 695,981
Funds flow from operations
(non-GAAP) (2) $ (340,001) $ (535,536)
Net earnings (loss) $ (611,937) $ (676,509)
Capital expenditures $ 1,750,766 $ 6,140,596
Working capital surplus (deficiency) $ (63,049)
Total assets $14,419,990
Shareholders' equity $12,181,577

Shares outstanding as of
August 17, 2006 22,709,179
Shares issuable for warrants
as of August 17, 2006 1,723,566
Stock options outstanding as of
August 17, 2006 2,086,000

Natural gas (Mcf) 15,932 33,688
Oil and NGLs (Bbls) 3,449 9,472
Total production (Boe) (3) 6,104 15,087

Natural gas (Mcf/d) 175 123
Oil and NGLs (Bbl/d) 38 35
Total production (Boe/d) (3) 67 55

Average selling price
Natural gas ($/Mcf) 6.35 6.95
Oil and NGLs ($/Bbl) 63.74 48.75
Total production ($/Boe) (3) 52.59 46.13

(1) On December 31, 2005, Azeri Capital Inc. ("Azeri"), a private
corporation, merged with Regal Energy Corp. through a Plan of
Arrangement pursuant to the Business Corporations Act (Alberta) and
changed the resulting corporation's name to Regal Energy Ltd.
("Regal" or the "Company"). As Azeri was a private corporation,
no historical comparative information is presented in these
financial statements as the information is not readily available.
(Note: Regal recognizes the industry norm of reporting results on a
calendar year basis and therefore plans on a calendar year basis
although its fiscal year-end is September 30.)

(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 Net Earnings and Funds Flow from
Operations section of the Management's Discussion and Analysis.

(3) 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.

During the third quarter Regal's field operations were hampered by delayed access and wet field conditions. At Kaybob, the tie in of the Company's new gas well was delayed due to rain and poor field conditions however construction was finished and the well was placed on production in late June. At Garrington, extended road bans in the area after spring breakup, followed by rain and wet field conditions in May and early June delayed construction work for the tie in of three new gas wells. The three wells commenced production in mid July. A fourth well drilled at Garrington during the quarter was recently completed and is scheduled to be tied in within four weeks. Five additional wells are scheduled to be drilled at Garrington prior to the end of calendar 2006.

At Atlee Buffalo, the Company's recently drilled heavy oil well was suspended in May resulting in lower heavy oil production for the third quarter. Significant workover costs expended on the well increased the Company's total operating costs by approximately one half and this combined with lower production volumes resulted in unacceptably high per unit operating costs for the quarter. The Company expects its operating cost structure will improve with increased production rates, the elimination of significant on-going heavy oil workover costs and its new focus on natural gas. The Company is targeting per unit operating costs in the range of $10.00/Boe.

Regal's production has increased with the tie in of the Kaybob and Garrington wells to a current rate of 180 Boe/d. At Kaybob, Regal's net share of production was only 20 Boe/d during the month of July due to liquid (condensate) loading in the new well. The well is producing gas with a high fluid level in the wellbore and is being reviewed as a potential candidate for artificial lift to increase its production rate. At Garrington, Regal's three new wells added 80 Boe/d of gas production. A fourth well is expected to add approximately 25 Boe/d net to Regal's production base. The Company has revised its targeted exit production rate for calendar 2006 to 400 Boe/d. Achieving this exit rate will depend on the results from Regal's on-going program at Garrington.

The Company is now forecasting an additional $3.9 million of net capital expenditures (after divestments of minor property interests of $1.3 million) to complete its program during calendar 2006 including $4.2 million of drilling and completions, $0.8 million of facilities and $0.2 million of seismic and land.

We encourage interested parties to access Regal's Third Quarter 2006 Financial (unaudited) and Operating Results and Management's Discussion and Analysis at

We also encourage interested parties to visit Regal's website located at for current corporate information, including updates to the Company's corporate presentation.

ADVISORY - Certain information regarding Regal set forth in this release, including management's assessment of the Company's future plans and operations, 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