Orleans Energy Announces Acquisition of Two Private Companies and Bought Deal Equity Financing

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CALGARY, ALBERTA--(CCNMatthews - April 6, 2006) - Orleans Energy Ltd. ("Orleans" or the "Company") (TSX VENTURE:OEX) is pleased to announce that it has entered into definitive agreements to acquire two private oil and gas companies and proceed with a private placement financing for anticipated net proceeds of approximately $36 million, on the terms set forth below:

Orleans To Acquire Private Company #1

The Company has entered into an agreement whereby Orleans will, subject to certain conditions, offer to purchase by way of a take-over bid (the "Offer") all of the issued and outstanding shares of a private, Alberta-based oil and gas company ("Privateco") for total consideration of $88.8 million including the assumption of approximately $15.0 million of net debt (including transaction costs and net of exercise proceeds from options and warrants). The aggregate purchase price for the common shares of Privateco is approximately $73.8 million, payable in a combination of cash and common shares of Orleans ("Orleans Common Shares"). Shareholders of Privateco can elect to receive, for each Privateco share, either $2.75 in cash or 0.466 of an Orleans Common Share, or any combination of the foregoing, subject to a maximum of $29,401,264 in cash being paid and 7,474,898 Orleans Common Shares being issued. This assumes that all outstanding options and warrants will be exercised. Orleans intends to finance the cash component of this acquisition with the proceeds of the bought deal equity financing discussed below.

The board of directors of Privateco have unanimously agreed to recommend the acceptance of the Offer. Certain shareholders, including the management and directors of Privateco, holding approximately 62.9% of the issued and outstanding common shares, have entered into lock-up agreements pursuant to which they have agreed to tender their shares to the Offer. The agreement provides that Privateco shall not, directly or indirectly, solicit or initiate any inquiries, discussions or negotiations with any third party with respect to any take-over proposal. Each of the parties has agreed to pay a non-completion fee of $3.0 million in certain circumstances. The acquisition is expected to close on or before May 31, 2006.

The acquisition provides Orleans with producing assets in the Gilby, Sylvan Lake and Medicine River areas of central Alberta, the Kaybob area in west-central Alberta and Gordondale and Grimshaw on the Peace River Arch. This acquisition expands Orleans' current focus areas from two core areas to three, thereby providing for a substantial increase to its undeveloped land base and drilling inventory over prospect areas similar in nature to Orleans' current asset portfolio. Key attributes of this acquisition for Orleans include the following:

- Approximately 17,000 net acres of high working interest (+70%) undeveloped lands with an estimated value of $4.24 million.

- Current production of approximately 1,250 boe/day, weighted 70% natural gas and 30% light crude oil (44 API) and natural gas liquids, with 95% operatorship.

- Proved plus probable reserves of approximately 4.0 million boe, reflecting Orleans' internal assessment of the reserves being acquired effective March 31, 2006.

- Substantial, multi-zone drilling opportunities. Orleans has presently identified 50 drilling locations, including high impact exploration prospects balanced with low risk infill and development drilling locations, with an additional 30 prospects requiring further technical refinement.

- Quality seismic database, including 54 square kilometres of proprietary 3D with an estimated value of $1.0 million, in addition to 39 square kilometres of trade 3D and 600 kilometres of trade 2D.

Orleans To Acquire Mercury Energy Corporation

Orleans has also entered into an arrangement agreement whereby, subject to satisfaction of certain conditions, Orleans will acquire all of the issued and outstanding shares of Mercury Energy Corporation, a private, Alberta-based oil and gas company ("Mercury") pursuant to a plan of arrangement (the "Arrangement") for a total consideration of approximately $20.9 million including the assumption of approximately $2.3 million of net debt. The aggregate purchase price for the common shares of Mercury is approximately $18.6 million, payable in a combination of cash and common shares of Orleans Common Shares. Shareholders of Mercury can elect to receive cash, Orleans Common Shares or a combination thereof, subject to a maximum of $10.0 million and a minimum of $5.0 million cash being paid. Orleans intends to finance the cash component of this acquisition with its recently disclosed, expanded bank credit facility of $22.5 million.

The board of directors of Mercury has unanimously approved the acquisition. Certain shareholders, including the management and directors of Mercury, holding approximately 51% of the issued and outstanding common shares, have entered into lock-up agreements pursuant to which they have agreed to vote in favour of the Arrangement. The arrangement agreement provides that Mercury shall not, directly or indirectly, solicit or initiate any inquiries, discussions or negotiations with any third party with respect to any take-over proposal. Mercury has agreed to pay a non-completion fee of $600,000 in certain circumstances. Orleans has agreed to pay a corresponding non-completion fee of $400,000 in certain circumstances. The acquisition is expected to close on or before May 31, 2006.

The acquisition provides Orleans with assets located in the areas of North Killam and Leo, both in close proximity to, and having similar geological characteristics of Orleans' Halkirk core operated property. Key attributes of this acquisition for Orleans include the following:

- Approximately 13,000 net acres of high working interest (80%) undeveloped lands, with an estimated value of $2.18 million.

- Current production of approximately 250 boe/day, weighted 65% natural gas and 35% light crude oil (32 API), with 100% operatorship.

- Proved plus probable reserves of 0.9 million boe, as internally evaluated by Orleans' technical personnel effective March 31, 2006.

- Numerous, multi-zone drilling opportunities. Orleans has presently identified 10 drilling locations and 8 new prospects offering geologic play diversity.

- A proprietary seismic database, including 14 square kilometres of 3D and 32 kilometres of 2D, with an estimated value of $0.5 million, in addition to 110 kilometres of trade 2D, 22 kilometres of trade 3D, and viewing rights to over 700 kilometres of 2D seismic.

Equity Financing

Orleans has entered into a bought deal private placement financing agreement with a syndicate of underwriters led by Peters & Co. Limited and including GMP Securities Ltd., Tristone Capital Inc., Dundee Securities Corporation and National Bank Financial Inc. The offering will consist of 5,600,000 subscription receipts at $5.90 per subscription receipt and 670,000 flow-through common shares at a price $7.50 per share for aggregate gross proceeds of $38,065,000.

The proceeds of the subscription receipt offering will be held in escrow pending Orleans' receipt of all requisite regulatory approvals and satisfaction of all outstanding conditions to proceed with the acquisition of the majority of the Privateco shares. Upon these conditions being met, the net proceeds of the offering of the subscription receipts will be released to Orleans and used by Orleans to fund the cash component of the purchase price of the Privateco acquisition. Each subscription receipt represents the right to receive one common share of Orleans on the closing of the Privateco acquisition. If the closing of the Privateco acquisition does not take place by 5:00 p.m. (Calgary time) on June 15, 2006 or the Privateco acquisition is terminated at an earlier time, holders of the subscription receipts will be entitled to a return of their full subscription price and their pro rata entitlement to the interest earned on the escrowed funds and the subscription receipts will be cancelled.

The net cash proceeds of the flow-through common share portion of this offering will be used by Orleans to incur Canadian exploration expenses prior to December 31, 2007 in an amount equal to the gross proceeds from the flow-through issue. Orleans will renounce the expenditures for the fiscal year ended December 31, 2006.

Closing of the offering is expected to occur on or before April 28, 2006 and is subject to the receipt of all requisite regulatory and stock exchange approvals. The securities issuable pursuant to the offering are subject to a four-month hold under applicable securities laws.

Pro Forma Orleans

The integration of the assets, acquired through the completion of the acquisitions, will transform Orleans into a significant, Alberta-based only, explorer and producer of crude oil and natural gas. These acquisitions expand Orleans' two current properties to five core properties in three focused areas where the Orleans' technical team has garnered numerous years of experience.

Upon closing of the acquisitions and the equity financing, Orleans will possess a diverse portfolio of assets necessary for long-term growth with the following corporate attributes:

- Access to over 42,000 net acres of high working interest acreage, more than tripling the Company's current undeveloped acreage position, with an estimated value of $11.1 million.

- Significantly expanded drilling inventory of an additional 60 identified locations, offering exposure to both light oil and natural gas prospects within a west-central Alberta geographic corridor.

- An incremental 38 prospects that upon additional technical review could significantly enhance further the Company's drilling inventory.

- Proved plus probable reserves base of approximately 8.7 million boe with a reserve life index exceeding 8 years.

- The additional 1,500 boe/day provides for a revised Orleans' 2006 exit rate projection in excess of 3,200 boe/day, weighted 65% natural gas and 35% light oil and natural gas liquids.

- Net debt of approximately $28 million (assuming the maximum cash amount is elected by shareholders of Mercury pursuant to the aforementioned Arrangement).

- Common shares outstanding of 30.3 million (assuming the maximum cash amount is elected by shareholders of Mercury pursuant to the aforementioned Arrangement).

- Aggregate tax pools in excess of $125 million.

The two acquisitions and the equity financing are accretive on a per share metric basis to Orleans' cash flow, reserves, production and net asset value. The combined purchase price of $101.8 million, net of the value allocated to the acquired undeveloped land and proprietary seismic, results in a proved plus probable purchase price of $20.78 per boe and approximately $68,000 per flowing boe of current production.

Orleans Energy Ltd. is a Calgary, Alberta-based emerging crude oil and natural gas company, with common shares trading on the TSX Venture Exchange Inc. under the symbol "OEX". Orleans is a team of dedicated, experienced professionals focused on the creation of shareholder value via acquisition and development of crude oil and natural gas assets in Alberta.

Certain information regarding the Company contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other similar statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. These statements are subject to certain risks and uncertainties, including the risk that either or both of the acquisitions may not close as planned, and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

In this news release, reserves and production data are commonly stated in barrels of oil equivalent ("boe") using a six to one conversion ratio when converting thousands of cubic feet of natural gas ("mcf") to barrels of oil ("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or "ngls"). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

In the news release, Net Debt refers to outstanding bank debt plus any working capital deficit or minus any working capital surplus. Net Debt is not a recognized measure under Canadian generally accepting accounting principals ("GAAP").

The TSX Venture Exchange Inc. does not accept responsibility for the adequacy or accuracy of this news release. Orleans Energy Ltd.
Barry Olson
President & CEO
(403) 215-2941
Email: bolson@orleansenergy.com

or

Orleans Energy Ltd.
Dean Bernhard
Vice President, Finance & CFO
(403) 215-2945
(403) 261-8850 (FAX)
Email: dbernhard@orleansenergy.com
Website: www.orleansenergy.com

or

Orleans Energy Ltd.
Suite 1250, 521-3rd Avenue S.W.
Calgary, Alberta, T2P 3T3