Austral Pacific Arranges $10 Million in Financing

Austral Pacific Energy Ltd. has executed an agreement with an accredited investor to privately place, with two managed investment funds, just under 7.7 million Series 1 preferred shares at a price of $1.30 per share for total financing proceeds of US$10m. The placement is to be made in two tranches, with the first half of the placement to be made immediately and the second at a date determined by Austral within 120 days. Proceeds will be used in connection with the Cheal field development and for working capital purposes.

The preferred shares are convertible one-for-one into Austral's common shares for a three year period and have a fixed dividend of 8% pa. They have voting rights on an as-if converted basis starting in 2008. If not earlier converted, the preferred shares are redeemable and retractable at par after 3 years. The placement is subject to regulatory approvals expected in the ordinary course. The preferred shares and any underlying common shares will not be offered or sold in the United States and will not be registered under the 1933 Securities Act (US). The shares and any common shares into which they are converted will be subject to a four month resale restriction in Canada.

Thom Jewell, Austral's CEO commented "We are pleased to have secured this financing. The funds will be used to accelerate an ambitious development and appraisal program for the remainder of this year.

The Cheal field facilities are progressing well and are now approximately 40% of the way through the final pre-commissioning and commissioning phases. The components that carried a high risk of weather delays are now complete. Detailed planning and scheduling are underway for additional Cheal development and step out wells and a second well in the Kahili gas field. The Cardiff-2 well testing operations will commence this month".

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