Rally Energy Increases Stake in Pakistan Concession

Rally Energy has entered into an agreement to increase its working interest in the Safed Koh Concession in Pakistan from 22.5% to 30%. The 200,000 acre Safed Koh Block, located in the province of Punjab, is a natural gas/condensate rich area.

The Offer to Purchase for the additional 7.5% working interest is with one of Rally Energy's Safed Koh Block partners (a private company) for a purchase price of US$11.4 million and is subject to certain conditions. Rally Energy has reserved for issuance to the vendor 1,372,846 million common shares, at a price of $2.30 per share, representing 25% of the purchase price. The remaining balance of US$8.55 million will be paid at closing from existing credit facilities. Rally Energy will have 94,750,716 common shares outstanding after giving effect to this transaction.

At December 31, 2005, Rally Energy's 22.5% working interest represented 9.8 million barrels of oil equivalent ("boe") in proved and probable reserves, as evaluated by an independent reservoir evaluation firm. This acquisition represents an addition of 3.3 million boe, on a proved and probable basis, at a cost of US$3.50/boe.

Construction of production facilities, pipeline and several development wells at the Salsabil Field is expected to commence in the third quarter with first production scheduled for late 2006.

Mr. Abby Badwi, President, noted that "this acquisition represents an excellent opportunity to enhance the corporation's position in this world-class natural gas play and, in conjunction with our successful Issaran, Egypt oil project, continues to reflect a corporate balance of oil and gas investments. This will provide us with the opportunity to increase our exposure to the upside potential of the two additional structures located directly south of the Salsabil Field."

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