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HCO Energy Ltd. Closes $27 Million Issue of Subscription Receipts and Updates Drilling Results.

CALGARY, Alberta--(BUSINESS WIRE)--March 7, 1996--HCO ENERGY LTD. (TSE: HCE HCE.PR.B Alberta Stock Exchange: HCE.PR.A)--HCO Energy Ltd. ("HCO") announced today that it has formally closed its previously announced financing of $27 million consisting of 20,000,000 subscription receipts at a price of $1.35 per subscription receipt.

The offering was underwritten by Goepel Shields & Partners Inc., Midland Walwyn Capital Inc., Peters & Co. Limited and Richardson Greenshields of Canada Limited. Proceeds from the subscription receipts have been placed with a custodian pending the successful completion or termination, as the case may be, of the take-over bid of HCO for all of the issued and outstanding shares of Chancellor Energy Resources Inc. ("Chancellor").

HCO has offered to acquire all the common shares of Chancellor in exchange for 0.32 common shares of HCO per share of Chancellor. This offer is set to expire at 5:00 p.m. (Calgary time) on March 13, 1996. In the interim Chancellor has continued development of its assts. A well is currently being drilled on the Kaybob property and another well is scheduled at McLeod River prior to breakup. Seismic activity is proceeding in the Ansell area. At Magrath, in the Lethbridge area of Alberta, seismic has been acquired to define gas development prospects for drilling late in the second quarter of this year.

HCO is also pleased to announce the completion of the first re-entry Keg River horizontal well at Rainbow. HCO, together with its partners Pamplona Energy Limited and Talon Energy Inc., are currently drilling the second re-entry and have the option of re-entering three other wells. The initial well flowed at rates in excess of 600 bopd and has been placed on production this week at an initial rate of 250 bopd on a 3/64 inch choke. HCO holds a 50 percent working interest in this project.

At Badger, HCO has successfully drilled a pool extension which will be completed in the next few days. An initial production rate of 75 bopd is anticipated in this 100 percent working interest well. This well establishes three to five additional infill locations on the southern edge of the pool. A northern extension will be tested with a well later this month.

During March HCO will be drilling two wells on its major Redwater property. HCO has increased water disposal capacity utilizing a new horizontal injector, which has has resulted in an immediate increase in net oil production rates of 300 bpd. HCO plans on further development in this area, which will be expanded by the addition of the Chancellor properties in Redwater. In the Cherhill area, HCO will be drilling an oil pool extension test prior to the end of the first quarter.

HCO is a Calgary based oil and gas company whose common and series B preferred shares are listed on The Toronto Stock Exchange (trading symbols "HCE" and "HCE Pref.B.") and whose series A preferred shares are listed on The Alberta Stock Exchange (trading symbol "HCE Pref. A.").

Chancellor is a Calgary based oil and gas company, whose common shares are listed on the Toronto Stock Exchange and The Alberta Stock Exchange (trading symbol "CHC").

-0- Neither the Toronto Stock Exchange nor The Alberta Stock Exchange have approved or disapproved the information contained herein.

CONTACT: HCO Energy Ltd.

Daryl Connolly or Brian Lemke, 403/231-8400
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Publication:Business Wire
Date:Mar 7, 1996
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