Regal Energy Ltd.

Regal Energy Ltd.

November 10, 2005 14:46 ET

Regal Energy Corp. and Azeri Capital Inc. Announce Increased Financing

CALGARY, ALBERTA--(CCNMatthews - Nov. 10, 2005) -

(Not for dissemination in the United States of America)

Regal Energy Corp. (TSX VENTURE:RGN) ("Regal") announced today that Azeri Capital Inc. ("Azeri"), the private company it has entered into an arrangement agreement dated October 31, 2005 with as announced in a previous press release on November 3, 2005, has agreed to increase the size of its previously announced proposed private placement to result in gross proceeds of up to $6,535,000. Azeri will issue up to 700,000 common shares of Azeri (the "Azeri Common Shares") on a "flow-through" basis at a price of $7.20 per share for gross proceeds of up to $5,040,000, as well as up to 230,000 Azeri Common Shares at a price of $6.50 per share for gross proceeds of up to $1,495,000 (collectively, the "Azeri Private Placement"). The Azeri Private Placement will not have a lead agent, but Azeri intends to engage a selling group of registered dealers (the "Agents") for the Azeri Private Placement and in connection therewith the Agents will be paid a commission of 7% of the gross proceeds. In addition, the Agents will be granted agents' options (the "Azeri Agents' Options") to purchase up to 10% of the number of Azeri Common Shares issued pursuant to the Azeri Private Placement at a price of $6.50 per share for a period of eighteen (18) months.

The closing of the Azeri Private Placement is expected to take place on November 29, 2005. Azeri intends to use the proceeds of the Azeri Private Placement for exploration and development expenditures and working capital purposes in the discretion of the board of directors of Azeri. Regal and Azeri have also entered into a farm-in agreement, pursuant to which Azeri will farm-in to certain prospects of Regal on negotiated terms.

About the Arrangement

Azeri and Regal have agreed to combine their businesses to form a new oil and natural gas exploration and development company (the "Arrangement"). Pursuant to the Arrangement, Azeri will complete a business combination with Regal, Azeri will change its name to Regal Energy Ltd. ("NewCo"), and Azeri shareholders will receive 7.37 shares of Azeri (the "NewCo Common Shares") for each current share owned (the "Azeri Reorganization"). Under the terms of the Arrangement, shareholders of Regal will receive one NewCo Common Share for each five common shares of Regal, and the outstanding stock options and agent's options of Regal will be replaced with one replacement stock option or agent's option of NewCo for each five options of Regal held, with adjusted exercise prices. The deemed price for the NewCo Common Shares to be issued in exchange for the common shares of Regal shall be $0.95 per NewCo Common Share. NewCo also intends to apply to list the NewCo Common Shares on TSX Venture.

Shareholders of Azeri and Regal will be asked to consider the Arrangement at special meetings expected to be held in late December 2005 with the closing expected to occur on December 31, 2005.

Completion of the Arrangement is subject to a number of conditions in favor of Azeri and Regal, respectively, including receipt of all necessary regulatory approvals (including the consent of TSX Venture), receipt of the approval of the Alberta Court of Queens Bench, receipt of any necessary third party approvals, approval of the shareholders of each of Azeri and Regal, the listing of the NewCo Common Shares on TSX Venture, and the completion of the Azeri Private Placement for gross proceeds of not less than $2,500,000.

Assuming the completion of the maximum Azeri Private Placement NewCo will have approximately 20,400,000 Common Shares outstanding.

New Director

It was previously announced the Board of Directors of NewCo will consist of five members, including Douglas O. McNichol and Owen C. Pinnell, current directors of Regal, as well as Al J. Kroontje and Douglas M. Stuve, current directors of Azeri, and one additional independent director. Regal is pleased to announce Mr. Robert M. Nicolay has agreed to join the board of directors of NewCo as the fifth director.

Robert (Bob) Nicolay is currently the President of Aurora Borealis Management, a consulting firm he founded to provide consulting and advisory services in corporate governance, energy investment and operations analysis, and strategy development/execution. From 1999 to 2005, Mr. Nicolay was President and Chief Executive Officer of ENMAX Corporation. ENMAX, a subsidiary of The City of Calgary, was incorporated in 1997 as Calgary's regulated electric utility transmission and distribution company and to compete and thrive in Canada's first deregulated electric industry. Under Mr. Nicolay's leadership, ENMAX developed into a vertically integrated corporation participating in electricity generation, transmission and distribution; and electricity and natural gas trading, wholesaling and retailing. Mr. Nicolay was awarded the President's Award by the Strategic Leadership Forum in 2004 and ENMAX was a four-time finalist in the Global Energy Awards, one of Canada's Top 100 Employers and one of Alberta's Most Respected Corporations. From 1999 to 2004, ENMAX grew by over 270% in shareholders' equity ($326 million to $1.22 billion) and had annual returns on equity, averaging over 18%.

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.
    Suite 1520, Life Plaza
    734 - 7th Avenue S.W.
    Calgary, AB T2P 3P8
    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
    Azeri Capital Inc.
    5418 - 11th Street N.E.
    Calgary, AB T2E 7E9
    Azeri Capital Inc.
    Al J. Kroontje
    President and Chief Executive Officer
    (403) 215-4830 ext. 225