Chron.com | (BW) Contract Signed To Sell 350 BCF Of Gas Under ACOR's ORRI VIC/P54; Fairbridge-1 Encounters Oil Shows-Preparing To Run Wireline Log

CISCO, Texas--(BUSINESS WIRE)--Jan. 10, 2006--Australian-Canadian Oil Royalties Ltd. (herein called ACOR) (OTCBB:AUCAF) is pleased to announce that the operator announced an agreement for the toll processing and sale of up to approximately 350 BCF of gas over 10 years with major Australian oil and gas exploration and production company Santos Limited. Under the terms of the agreement Santos has agreed to process raw gas from the Longtom field located in Bass Strait through its existing Patricia Baleen facilities near Orbost in Victoria, and then purchase the sales quality gas. The Longtom field is located on the offshore Australian block, VIC/P54 located in the prolific Gippsland Basin. VIC/P54 consist of 155,676 gross acres.

The agreement is conditional on the successful completion of the Longtom #3 appraisal well and the operator is confident that this will be achieved. Drilling of this well is scheduled to commence in May 2006. If the appraisal is successful, first gas is scheduled to be supplied from the project from June 1, 2008.

The company anticipates that Longtom will prove to be a substantial resource capable of delivering significant long term cash flow and value for ACOR. The gas from the Longtom gas field will be processed through the nearby Santos owned Patricia Baleen gas processing facilities located on the south coast near Orbost in Victoria. Processing the gas at Patricia Baleen will considerably reduce the operator's field development costs. It also has the additional benefit of utilizing existing infrastructure thereby reducing project technical risk and environmental impact.

ACOR owns a 1/20th of 1% ORRI.

More ACOR Assets in the Gippsland Basin

VIC/P60

ACOR also owns a 25% WI under Permit 60 located in the Bass Strait in Offshore Victoria and covers approximately 339,000 acres. Our company along with Holloman Corporation have conduced a detailed re-interpretation of the 2-D seismic resulting in the identification of a structure that, if productive, has the potential to contain mean reserves with a value of US$500,000,000, at today's hydrocarbon prices and before deduction of expenses. Robert Kamon of ACOR and Eric Prim, VP of Holloman Corporation, are leaving to travel to Australia to meet with the Department of Natural Resources & Environment to present the seismic report and discuss future development which includes a $US2,000,000 3-D seismic survey over the 6 structures located in the 2-D seismic re-interpretation.

ACOR owns a 25% working interest.

VIC/P45

The Kingfish Field begins 1-1/2 miles west of VIC/P45. The Kingfish Oil Field has produced in excess of 1.1 billion barrels of oil. Calculating at current crude oil prices of $US43.40 per barrel, this represents approximately $47.74 billion worth of production. The WI partner has announced the location for the next well to be drilled on VIC/P45. The location is called, the Scampi Prospect. The Scampi Prospect is based on stacked sands at the Top Latrobe level, with further stacked pay potential mapped down to a four-way dip closure at Top Golden Beach level. Scampi is considered by the operator to be a relatively low-risk play with an interpreted well-defined structural closure, the potential for high quality reservoirs and proximity to proven hydrocarbon charge. The primary target depth for Scampi is about 2700m.

The prospect has the potential to contain mean reserves of 34 million barrels of oil, if hydrocarbons are present at the Scampi prospect. There is further potential in the various deeper zones of this prospect. Both porosity and permeability at the Scampi location are assessed to be favorable, as evidenced by the same zones penetrated in the nearby oil discovery well, Archer-1, located to the immediate west, also in VIC/P45.

The WI partner stated that the purpose in drilling the Scampi prospect is two-fold:


1. To test the Scampi prospect's ability to contain oil.

2. If Scampi does contain oil, then Scampi could form the nucleus
for a hub of development of both the Scampi Prospect and the
known Archer oil accumulation, and any other oil that might
subsequently be discovered in the fault blocks in the vicinity
of the known Archer discovery.

An extension of Year 3 of VIC/P45 to May 2006 has been received from the Designated Authority. The WI partner states that a well could be drilled on VIC/P45 by May 2006, subject to rig availability, joint venture and other necessary approvals.

ACOR owns a 1/20th of 1% ORRI.

VIC/P53

The WI partner of VIC/P53 has completed the shooting of 524 km2 of high resolution 3D seismic data in VIC/P53 earlier this year at an estimated cost of $US5,000,000. The seismic shoot was an important milestone for VIC/P53, as it represented the first acquisition of a dedicated 3D seismic program over an area that, while located in the heart of the producing Gippsland Basin, is in many respects a frontier area. The VIC/P53 permit has the scope to be the location of a high impact feature at top Latrobe level. The frontier nature of the VIC/P53 Permit is highlighted by the fact that, although it is in the core of the producing area, there has not been a well drilled within the permit area during the last 20 years.

Over this period, seismic technology and computer power have both improved dramatically. These aspects, when taken together with the strategic geological location of VIC/P53, support the ACOR management view that there is potential to uncover new Top and intra Latrobe oil and gas plays on VIC/P53. One of the prime purposes of 524 km2 3D seismic survey in VIC/P53 was to investigate the area to the east of the Veilfin-1 well, which produced oil and gas shows, referred to as the Bazzard Lead.

The WI partner is now processing the seismic data and will employ leading interpretation and depth conversion experts to interpret the data and to carry out detailed depth conversion calculations. By early 2006, the operator plans to have completed its studies and to be then ready to drill a well in the Permit.

ACOR owns a 1/20th of 1% ORRI.

About The Gippsland Basin:

In excess of 4 billion barrels of oil/condensate and 12 TCF gas reserves have been discovered in the Basin since exploration drilling began in 1964, with remaining reserves estimated at 600 million barrels of oil and 5 trillion cubic feet of gas. Current production of the basin is around 140,000 barrels per day of crude and 570 million cubic feet per day of gas. At peak rates, the Gippsland Basin can deliver more than 1,000 million cubic feet a day. ACOR's offshore assets in the Bass Strait are all adjacent to giant producing fields and proximal to existing infrastructure and an expanding gas market.

ONSHORE AUSTRALIA PEL 100 DRILLING UPDATE

Fairbridge-1 Encounters Oil Shows-Preparing To Run Wireline Log

PEL 100 Fairbridge-1 Well:

The drilling program on PEL 100 has commenced with Fairbridge 1 well. The well spudded on December 26, 2005. The operator places the estimated potential reserves for the Fairbridge prospect at approximately 3.7 million barrels of oil for one of two culminations on the structure, if hydrocarbons are present. The Keleary and Telopea Oil Fields adjoin PEL 100 to the east.

The operator reports the following in the drilling report:

"Hydrocarbon shows were recorded at 2056-2061m and 2100-2108m in sands within the Birkhead Formation. The significance of these shows will be further evaluated with wireline logs after the hole reaches Total Depth.

"The hole was drilled from 2329m to 2385.5m prior to pulling out of hole to change the bit. Traces of fluorescence were recorded over the interval 2349-2359m in sands near the base of the Poolowanna Formation. The significance of these shows will be evaluated with wireline logs after the well has reached Total Depth.

"Current operations: The well has reached its targeted total depth. Conditioning hole prior to pulling out of hole to run wireline logs.

"Next 24 hours operations: Run wireline logs and evaluate the significance of the shows that were recorded while drilling through the Birkhead and Poolowanna Formations."

ACOR owns a 2% WI under PEL 100

About Australian-Canadian Oil Royalties Ltd.:

ACOR management draws no cash salary. ACOR has NO LONG-TERM DEBT. ACOR's principal assets consist of interests in 15,293,450 gross surface acres of overriding royalty interest and 8,900,776 gross acres of working interests, located Onshore Australia in the Cooper-Eromanga Basin and Offshore Australia in the Gippsland Basin in the Bass Strait.

ACOR is a publicly traded oil company trading on the NASDAQ OTC Bulletin Board Exchange under the trading symbol "AUCAF."

Summary:

Australia is a "hot spot" for oil & gas exploration and ACOR is positioned for possible "Company-Maker" discoveries. ACOR's working interest and overriding royalty interest are located offshore & onshore in the best producing basins.

Visit our website at www.aussieoil.com.

Disclaimer:

Except for historical information contained herein, the statements released are forward-looking statements that are made pursuant to the provision of the Private Securities Litigation Reform Act of 1955. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Such risks and uncertainties include, but are not limited to, market conditions, competitive factors, the ability to successfully complete additional financings and other risks.
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