Cooper/Eromanga Basin Drilling Program Begins - Lancer-1 Spuds & Ascender-1 to Follow on ACOR's ORRI.

CISCO, Texas -- Australian-Canadian Oil Royalties Ltd. (herein called ACOR) (OTCBB:AUCAF) is pleased to announce that the operator of PEL 115 & PEL 111 has announced the following update on drilling activities in the Cooper Basin South Australia on ACOR's ORRI.

The wells Lancer-1 in PEL 115 and Ascender-1 in PEL 111 which are part of the next phase of drilling are due to commence. The Joint Venture Operator has contracted the Ensign Rig 20 for the drilling program and the first well, Lancer-1, spudded today.

Lancer-1 is located in PEL 115 and is defined by the Mirage 3D with multiple reservoir objectives. The prospect is within the Mirage development zone and as such within close proximity to the Mirage production facilities approx. 3 miles to the south.

The Lancer prospect is a four way dip closed anticline located approx. 3 miles north of the Mirage production facilities and 2.4 miles southeast of the Narcoonowie Oil Field operated by Santos. The structure is defined by the Mirage 3D and has potential to contain pay in multiple reservoir horizons. Oil shows were recorded in Plotosus-1 drilled by Santos in 1997, 1.6 miles to the east. The Lancer Prospect has the potential to contain up to 5 million barrels of oil, if oil is present.

The next well, Ascender-1 is located in the central western portion of PEL 111. The Ascender prospect is also a large low-relief four-way dip closed structure, located 10 miles northwest of the Santos Charo oil discovery and 12 miles north of the recent Growler and Wirraway oil discoveries. The prospect is located in the northern region of the Western Margin Oil Fairway. Primary targets are the Lower Birkhead and the Hutton. The Ascender Prospect has the potential to contain approximately 5 million barrels of oil, if oil is present.

About PEL 115

PEL 115 on ACOR's ORRI consists of 273,297 gross acres and is divided into six (6) separate tracts. PEL 115 surrounds the oil & gas producing fields at Dullingari, Toolachee, Strzelecki, Della, and Kidman with cumulative recoverable reserves of approximately 104 million barrels of oil and approximately 2.5 TCF of gas or approximately $12.6 billion dollars using current market prices for crude oil and $US2.50 per mcf for gas.

The permit represents one of the lowest risk areas for exploration in the Cooper Basin. Initial studies of the available seismic data have identified several leads and prospects with the potential to contain commercial recoverable reserves of oil and gas, if oil and gas are present. The proximity to infrastructure suggests that the economic viability of any exploration success is assured.

A four well drilling program commenced in late August 2004 going through to mid December 2004. The first well, Hornet-1, defined by 3D seismic, encountering gas in the target Permian sands. Hornet-1 has been cased for production testing when a gas market has been identified.

Exploration drilling activity continued in the south-western part of PEL 115 with Ventura-1, where oil recoveries were made in the primary and secondary target sands, the Murta and Namur, with the Namur recovering oil at up to 352 barrels of oil per day.

Canberra-1 followed, testing a high risk but potentially high reward Permian sand stratigraphic gas trap, but hydrocarbons were not encountered.

The fourth well in the 2004 drilling program, Mirage-1, recovered oil from the Murta Formation on drill stem tests. PEL 115 Joint Venture commenced an Extended Production Test (EPT) in late April 2005 on Mirage-1 with a free flow rate of 274 barrels of oil per day.

During the year, the Mirage-1 and Ventura-1 wells in the South Australian Cooper Basin were put on long-term production, with production licenses being granted over both oil fields in August 2006.

Average combined gross production from the Mirage/Ventura oil fields for the past year was at a combined rate of 328 barrels of oil per day.

With the recent successful development drilling of Mirage-3 and Mirage-4 and fracture stimulation, we look forward to an increase in oil production from the Mirage Oil Field.

The interpreted recoverable oil reserve for the Mirage Oil Field using this information is a range of recoverable oil reserves from a mean of 1.3 million barrels up to a maximum of 3.6 million barrels, however; the interpretation of the 3D data set suggest that Mirage-1 could be part of a larger feature covering approximately 12 square miles. Such an area has the possibility of containing up to approximately 23 million barrels of oil in place, subject to the presence of suitable Murta sand reservoir on ACOR's ORRI.

ACOR owns 10% of 1% ORRI under PEL 115.

About PEL 111

PEL 111 lies to the north of and adjacent to PEL 104 and covers approx. 292,819 gross acres. The permit surrounds the Santos operated Charo Jurassic Oil Field production licenses. The February 2004 seismic survey in PEL 104 was extended to include PEL 111 to define potential drilling locations for the several leads and prospects interpreted as present in the permit adjacent to the Charo oil discovery.

Preliminary mapping of the February 2004 seismic data and reprocessed seismic data in 2005 has identified at least eleven leads and prospects, with an unrisked cumulative maximum (P10) recoverable oil and gas potential for the Birkhead/Hutton, Tirrawarra and Patchawarra targets of up to 40 million barrels of oil and 39 billion cubic feet of gas, if oil and gas are present.

Additional seismic data of 19 miles was acquired in September 2005 to further define a drilling location for the Ascender Jurassic oil prospect, up dip and 10 miles to the south west of the Jurassic Charo Oil Field.

Additional Jurassic prospects Warhawk and Gannett have been interpreted as potential drilling targets.

ACOR owns 10% of 1% ORRI under PEL 111.

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.