Radial Energy Farms-in to Huaya Prospect in Peru

Peru - Ucayali Basin
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Radial Energy has entered into a formal agreement whereby the Company has obtained a 20% working interest in the Huaya Anticline Project, Block 100 oil prospect located in the Ucayali Basin, Peru. As part of this agreement, the Company has transferred funds in the amount of 900 thousand U.S. dollars to be used in accordance with the Joint Operating Agreement to the further development of the project, including but not limited to the purchase of a drilling rig and related equipment to be used exclusively for the project.

Management believes that the prospect is a low risk opportunity to discover and develop a field with a potential for up to 20 million barrels of oil with excellent economics, with the first well scheduled to be drilled by the end of the 3rd quarter of 2006. The prospect is analogous to the nearby Maquia Field which has produced approximately 17 million barrels of oil to-date, and is on the same anticlinal feature.

The project encompasses a seismically-defined structural "pop-up" closure with the potential for up to 41 very shallow well locations. A well drilled in 1984 by the Peruvian state-owned oil company on the down-dip flank of the primary reservoir tested 39-degree gravity oil. There is an established oil market offering international prices and an existing transportation network with refineries nearby. If successful, the play indicates excellent economics, with international pricing, shallow drilling depths and initial production rates of between 200 to 800 barrels per day, per well based on results from the nearby Maquia Field.

The Company has contracted Gustavson and Associates of Boulder, Colorado to perform a reserve assessment, the preliminary results of which has proven instrumental in Management's decision to quickly move ahead with the project. The results of the final report, expected within one week, will be released upon completion.

Company President G. Leigh Lyons stated, "Preliminary results of the reserve assessment being performed by Gustavson and Associates, corroborate management's view of this project; good quality oil is present and appears to be trapped in a 'pop-up' structure up-dip of the Huaya 4X well. With success, our first up-dip well scheduled to be drilled in September 2006, will help us to confirm our current geological interpretation regarding the extent of the structural closure, the initial oil production rates and the expected recovery factors. This project clearly reflects the key elements of the Company's strategy; a previously drilled exploratory well with live oil tests (inferring trap, seal and untapped reserves) and a failure of the previous operators to develop the potential discovery. Radial will continue to implement this strategy in Peru, Colombia and other stable Latin American countries where many more such cases of overlooked reserves exist due to a combination of factors including previous geopolitical, economic and commodity pricing downturns, or even poor geological interpretation by the previous operators of these wells."

Radial Energy identifies, acquires and develops low risk oil and natural gas exploration and development opportunities in Latin America. The Company is currently focusing these efforts in Peru and Colombia as these countries represent regional first tier competitive business prospects with tremendous investment incentives for oil and gas companies. Management has analyzed the business climate and determined that factors such as lower production taxes and government takes alongside extensively improved civil and social conditions provide for significant opportunities with limited risk. The Company remains flexible and will pursue opportunities as they arise in other stable, foreign investment-friendly countries in the region, such as Argentina and Brazil.

The Company's primary focus is on identifying previously drilled but subsequently abandoned exploratory wells that encountered and/or tested live oil or natural gas indicating the presence of marketable hydrocarbons, reservoir and trap. If, after careful study, it is determined that low-risk potential for profitable field development exists, the Company acquires a working interest in the project, dealing either with the current concession holders or the government. The Company's first investment, the Huaya Anticline, Block 100, Peru project is an excellent example of the results of this strategy.

The Company plans to become the operator of record in the majority of its future projects. Management intends to participate in new exploration prospects and old field development opportunities if such investments fit the economic criteria established by the Company.


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