Longtom 3 Offshore Well Flows at 30 Million Cubic Feet of Gas Per Day From Just One (1) of Four (4) Reservoir Sands To Be Tested On ACOR's ORRI.

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 1st production test on the Longtom 3 well over the upper sands (400 reservoir sands) has been achieved. The well was opened up at an initial flow rate of approximately 30 Million cubic feet of gas per day before being choked back to achieve a stabilized rate.

The well was flowing at approximately 23 Million cubic feet of gas per day through a 1" choke with a flowing well head pressure of 1200 psi. The Longtom 3 well will continue to be flowed until later today to monitor stabilized gas flow rates and pressures prior to shutting the well for approximately 12 hours to monitor the pressure response from the reservoir.

Important Discovery:

The Longtom 3 well is being tested over the 400 reservoir sand interval; this is the same sand interval in which gas flow was not achieved in the Longtom 2 well.

The results from this test are very exciting as they confirm the flow potential of the upper sand, the 400 reservoir sand in the Longtom Gas Field on ACOR's ORRI, addressing a major concern leading up to the drilling of the Longtom 3 well.

As you will remember from previous ACOR press releases, gas flow was not achieved in the same upper sands test of the Longtom 2 well, a test that the operator had interpreted to have failed due to down hole mechanical problem.

Future Operations:

After completion of this test the 400 reservoir sand interval will be isolated and the well prepared for a combined test of the lower sands 100, 200 & 300 reservoir sands completed predominantly in the horizontal section of the well.

Following the testing of the lower reservoir sands the Longtom 3 well will be suspended as a future gas producer. The results of the second test are expected to be available over the next week.

The Longtom-3 H (Horizontal) well reached a total measured depth of approximately 15,335 feet. Drilling intersected a total of 3,379 feet of gross gas reservoir on ACOR's ORRI.

About VIC/P54:

The Longtom Gas Field is located in the Gippsland Basin on ACOR's ORRI under VIC/P54 and was discovered by BHP in 1995, but was considered sub-commercial (70-120 BCF) at the time due to the lack of maturity of the gas markets and the interpreted reservoir quality. A 386+ meter gas column was intersected in the Emperor Formation in the Longtom 1 well.

The Longtom 2 well was drilled in late 2004. A 400+ meter gas column was confirmed within the structure. The lower reservoir sand section in Longtom 2 flowed at a stabilized rate of 18-19 Million cubic feet of gas per day over a 12 hour period -- an excellent result confirming the commercial potential of the previously untested lower reservoir section in Longtom. The upper reservoir sand section did not flow gas to surface -- two third party engineers confirmed a subsurface test valve did not open; hence the well could not flow against the closed valve. A core from the upper reservoir section was taken and analyzed, confirming an excellent reservoir section highly capable of flowing gas. No gas-water contact has been intersected at Longtom to-date, suggesting deeper reservoir potential exists.

Since then, the operator of VIC/P54 has increased their best estimate of the Longtom Gas Field on ACOR's ORRI by 38% to 438 BCF of possible gas reserves.

Full Field Development Of Longtom Gas Field

Planned future well operations are to complete and flow test both the upper and lower gas sands to confirm their productivity. 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 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 Longtom 3 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 four (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.