Rancher Energy Signs LOI for $83.5 Million Financing

Rancher Energy Corp. has executed a letter of intent with an experienced industry operator under which up to $83.5 million in financing is expected to be provided to drive Rancher Energy's CO2 recovery program in Wyoming's Powder River Basin. Closing of the transaction, which is subject to regular corporate approvals, completion of due diligence and certain conditions, is scheduled to occur on or before April 30, 2008.

Under terms of the proposed financing agreement, in return for an $83.5 million investment, the industry partner will earn up to a 55% working interest in Rancher Energy's three fields in the Powder River Basin -- the Big Muddy, Cole Creek South, and South Glenrock B. The earn-in period is expected to be three years, or less depending on the requirements of the development plan. The majority of the proceeds will be used to fund CO2 operations while slightly more than $12.2 million will be used to retire Rancher Energy's note to GasRock Capital. In connection with that note, Rancher Energy granted GasRock a 2% overriding royalty interest in the three fields. Rancher Energy has the right to repurchase 50% of that override interest and will assign that right to the industry partner.

The letter of intent also provides that the two companies will agree to an area of mutual interest (AMI) of three miles surrounding each field. Accordingly, if either company acquires assets within the AMI, the other company will be entitled to the ownership interests in those assets as set forth in the letter of intent. Rancher Energy has agreed that it will cease all existing negotiations and will not share any data or begin any new negotiation with a third party during the next 60 days.

"We are pleased with this arrangement," said John Works, President & CEO. "We believe that our prospective partner is well financed with significant industry expertise, and we look forward to moving ahead with our ambitious EOR program at three promising, historically productive fields in the Powder River Basin."


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