Looking to tap into stranded natural gas in the state of Kentucky, Australian-Canadian Oil Royalties Ltd. (ACOR) said Monday it has signed a general pooling agreement on the Park City Gas Field in Kentucky and also plans to construct a low-pressure natural gas gathering system to get gas from the project to market.

The pooling agreement gives ACOR a 22% working interest in the pool under approximately 38 shut-in gas wells. In 2002, ACOR made a significant change in its operations by including domestic oil and gas exploration in its program. ACOR entered into an agreement with Resource and Energy Technologies Co. for the drilling and development of oil and gas in the Park City Field prospect in Edmonson County, KY. This field is located in the Highland Rim Physiographic Province that extends over portions of central Kentucky and middle Tennessee. As of April 5, 2004, a total of over 38 wells have been drilled and paid for. ACOR has paid its drilling costs with restricted common stock based on a value of $1.00 per share.

Because of the lack of gas gathering pipelines in the area, it has taken ACOR five years to get the project to this point. The company noted that it has been long known that this part of western Kentucky contains significant shallow natural gas reserves from several different formations, including the Ft. Payne Limestone, New Albany Shale and Silurian/Devonian carbonates.

Atmos Pipeline and Storage LLC has executed agreements with the developing companies to construct the gas gathering system. The Park City gathering system initially will gather natural gas from the 38 shallow gas wells that are currently shut in without a market. The gas will be processed, compressed and delivered to Texas Gas Transmission's pipeline east of Bowling Green, KY, for redelivery to consumers in the Atmos gas system.

January 2005 tests of some of the wells by Production Meter & Testing Co. found encouraging results. The Parsley No.6 well on a 24/64 choke tested at 494 Mcf/d, while the McCombs No.3 well, also on a 24/64 choke, tested at 960 Mcf/d. The Royce Houchin No.2 well had fluid in it and tested flat at 50 Mcf/d.

While ACOR currently owns a 22% working interest in the Park City Kentucky gas pool, the company noted that other interests will be added to the pool, which will reduce ACOR's percentage in the gas pooling unit but will increase the gas reserves in the extended pooling agreement.

Incorporated in Vancouver, BC in 1997, ACOR's principal assets consist of 15,440,116 gross surface acres of overriding royalty interest and 8,561,007 gross acres of working interests located onshore Australia in the Cooper-Eromanga Basin and offshore Australia in the Gippsland Basin in the Bass Strait.

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