Australian-Canadian Oil Royalties Ltd. (ACOR), Waco, Texas, (OTCBB: AUCAF) has signed a series of agreements with two private Australian companies and a private Canadian company, to acquire, amongst other things, a 100% working interest in Petroleum Leases 18 and 40 ("PL 18" "PL 40") and a 50% working interest in Petroleum Lease 280 ("PL 280")in the Surat Basin in Queensland, Australia .

Acquisition Highlights

PL 18, PL 40, and PL 280 are located in the Bowen/Surat Basin in Queensland Australia . This basin was home to the first oil discovery in Australia, and is currently the focus of significant coal-seam gas exploration and production activity.

The assets acquired by ACOR include 5 oilfields: Yellowbank Creek, Thomby Creek, Louise, McWhirter, Narrows and Beardmore. These fields were developed in the 1970's and 1980's, and have produced some fraction of the estimated oil originally in place (OOIP). ACOR believes that additional oil is recoverable through the application of well-established enhanced recovery techniques including downspacing, horizontal drilling, and reservoir pressure maintenance through waterflooding.

In 2007, the Vendors obtained an independent resource report by CDS Data Services Pty Ltd. to assess the remaining recoverable oil resources in the 5 fields. The CDS Report provided a range of 3.8 million barrels of oil equivalent to 6.7 million barrels of remaining recoverable oil resources. Since 2007, there has been no significant investment in the fields as the Vendors were unsuccessful in securing the necessary capital to develop the remaining oil resources. The fields are currently producing 4 barrels of oil per day (bopd) of high quality 51 degree oil, which is sold at a premium of approximately US$8.50 to Brent Crude oil. In the first quarter of 2012, subject to completion of the Acquisition, the company will be undertaking a workover program of certain wells on PL 40 and PL 280 which will reactivate two old wells at a cost of A$250,000 . The workover program is anticipated to bring total field production to approximately 25 barrels of oil per day.

Acquisition Terms

Under the terms of the Agreements, ACOR will issue an aggregate of 21,850,000 common shares of the company, and issue 5,000,000 Share Purchase Warrants of ACOR. The Warrants have a strike price of US$0.25 per ACOR share, and will vest if the company trades at a price above US$1.00 per share for 10 consecutive days, with a total of 100,000 ACOR shares traded during such 10-day period.

Additionally, the company has agreed to pay the Vendors US$3.0 million within 12 months of the closing of the Acquisition. The Vendors have secured a first lien over PL 18, PL 40, and PL 280. The company intends to secure a reserve based lending facility to refinance the Deferred Consideration, which does not accrue interest or other charges within 12 months of closing.

The company has also agreed to pay an overriding royalty of 3% to the Vendors on production attributable to PL 18, PL 40, and PL 280.

After giving effect to the Agreements, ACOR will have 44,595,680 shares issued and outstanding, 5,000,000 Warrants with a strike price of US$0.25 expiring 24 months from the closing date of the Acquisition and no stock options or other dilutive instruments issued. The Acquisition is subject to shareholder approval by only one of the Vendors (and, for clarity, the Acquisition is not subject to shareholder approval of the other Vendor) from certain shareholders of such Vendor. In respect of the Vendor that has the shareholder approval condition, ACOR has received lock-ups representing 51.6% of the issued and outstanding shares, who have agreed to vote in favor of the Acquisition.

The closing of the Acquisition is anticipated in January 2012 , subject to: completion of the proposed financing described below; Vendors obtaining approval of the Minister of the State of Queensland, Australia , as well as other required consents; the renewal of the Authority to Prospect on ATP 582 from Australia and approval of the shareholders of the Vendors; no material adverse changes in the company's financial and operational condition and maintaining its listing on OTCBB; and other customary closing conditions.

Updated Reserves and Resources

The company will be obtaining an updated reserve and resource report over all of the assets in the company's portfolio, including the Surat Basin assets to be acquired and also ACOR's ATP 582 in the Georgina Basin. It is anticipated the report will be finalized in the first quarter of 2012.