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M.L. Cass Petroleum Corporation And Regal Petroleum Limited To Enter Into Business Combination And Develop Ukrainian Natural Gas And Condensate Field.

Business Editors

CALGARY, Alberta--(BUSINESS WIRE)--May 9, 2000

M.L. Cass Petroleum Corporation ("Cass") (TSE:MLO.) announced today that it has executed a Letter of Intent to enter into a business combination with Regal Petroleum Limited ("Regal"), a private oil and gas company headquartered in London, England. The business combination is subject to regulatory and shareholder approval.

Regal has privately raised and expended approximately A$5,000,000 (Cdn. $4,400,000) over the past two years to technically evaluate and enter into a Joint Venture production sharing contract with the Government of the Ukraine for the development of the Chernigiv Gas and Condensate Fields (the "Chernigiv Fields") in the northeastern oil and gas region of the Ukraine. Located in central Europe with a population of approximately 52 million, the Ukraine was one of the first former Soviet Union countries to become a Federated Republic when the Soviet Union adopted a new democratic constitution in 1996.

Cass continues to develop its shallow oil and gas properties in the eastern part of the Province of Alberta.

The Chernigiv Gas and Condensate Fields

The Chemigiv Fields consist of three gas and condensate fields located approximately 200 km east of the capital city of Kiev in the north central part of the Dneiper-Donets Basin. The three fields are located in close proximity to one another and can be treated as a single large development project. Based upon an independent report prepared by the consulting engineering firm of McDaniel & Associates Consultants Ltd. of Calgary, Alberta, as at January 1, 1999, the Chemigiv Fields have the following oil and gas reserves:


 Natural Gas Condensate
 Gross Net
Reserve Category
 Bcf Bcf (Millions of Bbls)
Proved Reserves 299.2 244.6 22.6 18.5
Probable Reserves 606.7 436.9 29.6 20.7
Proved and Probable
 Reserves 905.9 681.5 52.2 39.2


 Present Value of
 Future Net Cash Flows
 (Millions of US$)
Reserve Category
 0% Disc. 15% Disc.
Proved Reserves 388.1 191.3
Probable Reserves 888.2 374.6
Proved and Probable Reserves 1,276.3 565.9


WTI ($US/bbl) 2000 - $16.90, 2002 - $19.20, 2003 - $20.04

Natural Gas (Nymex) 2000 - $1.98, 2002 - $2.06, 2003 - $2. 10

The Joint Venture agreement with the Government of the Ukraine requires Regal to pay 100% of the capital costs to develop the fields to earn a 90% interest in net cash flows before payout, reverting to 75% of net cash flows after payout. Regal has also negotiated a gas sales contract with the national electricity company of Romania ("Conel") to deliver up to 75 million cubic feet of natural gas per day to Conel, increasing to 140 million cubic feet of gas per day in the winter months. The natural gas contract is denominated in US dollars.

The Chernigiv Fields are currently producing and selling approximately seven million cubic feet of gas per day from five wells. The revenue remains with the Joint Venture partner until commencement of the work program. Upon completion of the business combination, scheduled to be placed before the shareholders of Cass at its upcoming meeting on June 29, 2000, Cass will commence a work program at the "MEX" and "GOL" licenses in the Chernigiv Fields. The US $15,000,000 work program will consist of a limited seismic program, workovers on 4 existing drilled and completed wells, and the drilling of 2 new wells.

In addition to the Chemigiv Fields, Regal has three exploration, development and production licenses in Romania which are highly Prospective and are in the advanced exploration stage of development.

Corporate Structure and Financing

Currently, Cass has 14,818,792 shares issued and outstanding. The Letter of Intent between the parties contemplates issuing up to 25,000,000 special warrants (the "Special Warrants") at a price of Cdn. $0. 10 per warrant to provide initial working capital for Cass. Each Special Warrant will entitle the holder to acquire, at no additional cost, one common share (the "Common Shares") of Cass on the earlier of: a) five business days after the date a receipt has been issued by the appropriate Canadian securities commissions for a final prospectus qualifying the issuance of the Common Shares on exercise of the Special Warrants or b) one year from the date of issuance of the Special Warrants, Salman Partners Inc. has agreed to act as agent, on a best-efforts basis, for the sale of the Special Warrants.

Shareholders will be requested to approve the sale of Special Warrants at Cass' upcoming meeting, together with the business combination involving Cass and Regal. Pursuant to the terms of the Letter of Intent, each holder of ten securities of Cass will receive one share, or the right to acquire one share, for each outstanding security and each holder of one share of Regal will receive one share of the new entity. This will result in holders of Regal shares owning approximately 84% of the new entity, Upon receipt of the appropriate regulatory and shareholder approvals, together with the exercise of the Special Warrants for Common Shares in the new entity, there will be approximately 26 million shares issued and outstanding of the new entity.

Following Cass' meeting, Cass plans to raise an additional US $15,000,000 to fund part of the work program for the Chemigiv Fields. Salman Partners Inc. will be granted the right of first refusal to act as agent for this equity financing, the price and terms of which will be determined following initial trading in the new entity.

Other terms and conditions of the business combination are the following: (i) the new entity will have a five member Board of Directors, consisting of three representatives of Cass and two representatives of Regal; (ii) Cass will have a minimum of Cdn. $600,000 in cash and no more than Cdn. $100,000 in debt at closing; and (iii) the name of the ongoing entity will be changed.
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Publication:Business Wire
Date:May 9, 2000
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