Radial Energy to Acquire Colombian Producer

The board of Rancho Hermoso S.A. has approved an offer from Houston-based Radial Energy Inc. to acquire 100% of the shares of the Colombian production company. The deal is subject to approval from Colombian authorities, which may be legally required. Senior managers from both companies will sign a formal memorandum of understanding next week in Houston.

Rancho Hermoso S.A. is a privately held Colombian oil production company and operator of two oil fields located in the Casanare department of Colombia. The Rancho Hermoso and Entrerrios fields are geologically located in the Llanos Basin, one of the most prolific hydrocarbon producing areas of South America including the giant Cano Limon and Cusiana/Cupiagua fields.

Ecopetrol discovered the Rancho Hermoso field in 1983 with production of 37 API oil from the Mirador formation beginning in May 2000. The contract with Ecopetrol, which covers 24,167 acres, is classified as a Production Contract, which specifies a "tariff" or production payment payable to Rancho Hermoso in exchange for operating the field and paying 100% of all costs. Cumulative production through July 2006 is 7,166,792 barrels, from three Mirador wells, with July production at 2,827 BOPD.

Rancho Hermoso S.A. is currently negotiating for the rights from Ecopetrol to develop and produce oil from the Ubaque formation in the Rancho Hermoso field. The agreement, subject to the approval by Ecopetrol's Board of Directors, would allow Rancho Hermoso S.A. to test, and if successful, produce and receive revenues from 30% of the oil produced from the formation that currently shows as a potential producer in the recently drilled RH-4 well. Additionally, the field may have potential to produce from the Gacheta and Guadalupe intervals.

Nearby, the Entrerrios field began production in May 2004. Rancho Hermoso S.A. owns 60% of the rights to the Production Contract for this 14,920-acre area that provides for production sharing of the oil, with varying percentages for the Mirador and Ubaque formations that are producing from depths of between 8,950 and 9,650 feet. Cumulative production through September 2006 is 286,530 barrels from the Mirador and 351,828 barrels from the Ubaque formation. Production rates for the two producing wells in the field were 762 BOPD and 324 BWPD from the Mirador, and 1,445 BOPD and 115 BWPD from the Ubaque formation.

Radial President, G. Leigh Lyons comments, "The acquisition of Rancho Hermoso S.A. shall be a milestone event and further evidence of Radial's commitment the execution of its corporate strategy. In Colombia and Peru, we completed the first stage of our strategy with the acquisition of participation in the Huaya and Bosques blocks. With the acquisition of Rancho Hermoso S.A., we will complete the second stage of our strategy in Colombia with the acquisition of a reputable company with excellent infrastructure, personnel, production, significant cash flow and considerable upside development potential. Importantly, we will have acquired the status of 'operator' that we view as crucial to our future growth in Colombia and the region. As an operator of record we can now acquire exploration and production assets in the region at the ground-floor level without being subjected to promotes, minority interests and limited operational control."

Radial Energy identifies, acquires and develops low-risk oil and natural gas exploration and development opportunities throughout the Americas. The Company's strategy involves targeting overlooked or under-developed reserves that are under the radar of multinational oil companies and out of the reach of small independents.

The Company targets prospective oil and natural gas opportunities in historically productive regions with a focus on identifying previously drilled but undeveloped exploratory wells that, due to factors at the time of initial drilling including the absence of pipeline infrastructure, lack of modern recovery technology, poor geological or engineering interpretation or low oil and gas prices, were not fully exploited.


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