$35,000,000 Offshore Longtom 3 Horizontal Well On ACOR's ORRI Completed with 3,379 Feet of Gross Gas Reservoir Intersected - Production Testing Next.

CISCO, Texas -- Australian-Canadian Oil Royalties Ltd. (herein called ACOR) (OTCBB:AUCAF) is pleased to report that the operator of VIC/P54 states that the Longtom-3 H (Horizontal) well has reached a total measured depth of approximately 15,335 feet. Drilling has intersected an additional 328 feet of gross gas sands in the lower part of the Admiral Formation, making a total of 3,379 feet of gross gas reservoir intersected on ACOR's ORRI. The remaining objective for the Longtom 3 well is the confirmation of sufficient gas reservoir productivity from the well to achieve long-term gas flow rates.

Key Points

The Longtom 3 H (Horizontal) well has:

Confirmed that major gas sands identified in the Longtom 2 well are continuous in both dip and strike directions.

Given the operator a better understanding of the different pressure systems and gas water contacts in each of the five (5) reservoir sands encountered in the Longtom Gas Field.

One (1) of the five (5) reservoir sands encountered had a gas column of approximately 919 feet. NOTE: It is important to note that the Longtom 3 well has intersected gas below this reservoir in a lower, major reservoir unit confirming an even deeper gas water contact in this reservoir sand.

The estimation of permeability in approximately 3,379 feet of gas sands made from measurement while drilling equipment (to be confirmed during production testing).

The confirmation of the connectivity of the different reservoir sands in the field through the acquisition of additional pressure measurements.

The confirmation that seismic amplitude techniques are an effective predictor of the presence of gas sands across the Longtom Gas Field.

Current Operations:

Since the last ACOR press release, the 7" production liner has been successfully run and cemented inside the horizontal section, across the 3 deepest sand bodies of the Admiral formation. The well bore has been circulated to brine, and 3507 feet of perforations have been shot in the production liner.

Planned future well operations are to complete and flow test both the upper and lower gas sands to confirm their productivity. Subject to a successful flow test over the coming two weeks, the operator of VIC/P54 is confident that Longtom will proceed to full field development.

The operator believes that the Longtom 3 well has helped to define a substantial reserves base and a full field development decision is likely to be made by late 2006. It is expected reserves base will continue to be further enhanced by the drilling of a second Longtom development well planned for late 2007. The results of the production test are expected to take approximately up to 20 days.

The Operator of VIC/P54 said, "The geological data gained from the horizontal well together with the planned production test will provide us with significantly more confidence in our interpretation of the field's resource potential."

The Longtom 3 horizontal well will provide further important appraisal data in relation to the lateral distribution and quality of gas reservoirs in the Longtom field. The well is located in VIC/P54 on ACOR's ORRI, which consists of 155,676 gross acres located offshore Australia in the Gippsland Basin.

The well is being drilled utilizing the Ocean Patriot drilling rig.

Contract Signed with Santos to Sell 320 BCF of Gas on VIC/P54

ACOR is also pleased to announce that the operator of VIC/P54 has signed the Longtom Gas Sales and Toll Processing Agreement with Santos. The agreement will enable the operator of VIC/P54 to process and sell up to 350 BCF of gas over 12 years (with an option for additional 91 BCF of gas) from the Longtom Gas Field located in Bass Strait on ACOR's ORRI.

The gas from VIC/P54 will be processed through Santos existing Patricia Baleen facilities near Orbost in Victoria. The Longtom Gas Sales Agreement with Santos is conditional on the successful completion of the Longtom-3 appraisal well and the operator of VIC/P54 is confident that this will be achieved.

Upon a successful completion of Longtom-3, the first gas is anticipated to flow from the Longtom Gas Field by mid 2008.

The Longtom-3 well is a complex well and will cost approximately $35 million to drill and complete, roughly double the average cost of a Bass Strait (Gippsland Basin) well.

ACOR anticipates that the ORRI under VIC/P54 will prove to be a substantial resource capable of delivering significant long term cash flow and value for our shareholders.

ACOR owns a 1/20th of 1% ORRI under VIC/P54.

ACOR owns interest in 4 offshore concessions located in the Bass Strait in the Gippsland Basin, the largest interest being 25% working interest under VIC/P60.

VIC/P60 is located just southeast of Permit 45 and covers approximately 339,769 acres, it is also ACOR's largest working interest asset offshore. ACOR management has identified six leads from the existing seismic data. The A-1 lead is approximately 4.97 miles long and 1.24 miles wide with a seismic bright spot anomalie rated good to excellent. The seismic bright spot is 108' thick and 820' horizontal by 20,500' perpendicular wide behind a fault on the flank of the anticline. ACOR has traced the beds to the nearest oil and gas fields after processing 5,000 +/- seismic lines.

The A-1 Lead, if productive has the possible potential to contain approximately 77,771,244 barrels of oil or $US4,666,274,644 at current market prices.

ACOR owns a 25% Working Interest under VIC/P60.

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.

Some of the very best oil production in the world is found in the Gippsland Basin. Take for example, the Halibut Oil Field. The average well in the Halibut Oil Field has produced 60,000,000 bbls of oil per well or $4,200,000,000 worth of oil per well, at today's prices of $70.00 per barrel.

About Australian-Canadian Oil Royalties Ltd.:

ACOR management draws no cash salary. ACOR has NO LONG-TERM DEBT. 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.

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 interests and overriding royalty interests 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.