Chancellor Group Inc (CHAG)

[mmayr]

Energy Company Chancellor Group, Inc. Announces First Crude Oil Shipment From Kansas Field


BOSTON--(BUSINESS WIRE)--May 29, 2001--Oil and Natural Gas company Chancellor Group Inc. (OTC: CHAG - news) announced today that the first shipment of oil has gone out from their Shinkle Field property in Kansas.

Chancellor Group shipped an initial 180 barrels of 23 degree API crude oil on Friday from the Kansas property, and plans are under way to schedule additional pick-ups in the very near future. The frequency of these will gradually increase as further existing wells are brought on-line and the infill well drilling program gets underway.

The Company stated that various equipment failures and ongoing repairs have resulted in lower than expected output to date, but that this situation is being rectified in an orderly manner, and that both production and output should increase steadily over time. The Company has been hampered by very old equipment and facilities, much of which is being replaced currently. The Company has commenced a comprehensive rehabilitation program to bring these wells up to industry standard, and the Company stated that this program should enhance and improve the performance from the existing wells as it is completed. In addition the Company announced that it was sending a new production engineer to the site this week to further bolster existing personnel and expedite the completion of the rehabilitation program and to improve production numbers from the existing wells.

The expected average lifting price was around $22 per barrel owing to lower than expected average crude quality. Crude quality was affected by problems with a separator tank, repairs to which should be completed by next week, but in the meantime is being bypassed so as to continue the flow of crude oil production into the storage tank for collection. Also, the majority of the crude shipped was derived from the squirrel formation on the property.

The Company intends to bring as many as 18 of the existing wells back on line over the next 4-6 weeks, and to improve the performance characteristics of each well as the remediation program progresses. In addition the Company in early June will drill the first of 20 new infill wells, and will define the extent of the natural gas reserves on the property, as well as likely extend the proved recoverable oil reserves, and the field life of the property. Output will increase substantially as the new infill wells are drilled and completed, and as the remediation program is completed.

Shane Rodgers stated, "We are very pleased to finally announce that the first shipment of crude oil has been picked up from our Kansas property. It has truly been a battle achieving this pick-up due to continual remedial work on the oil wells, and unforeseen weather and technical problems. I personally would like to take this opportunity to thank our shareholders for their patience and support as we continue to work on developing and delivering oil from the Kansas property. It has been a long road for the company and its shareholders, but we are very excited to finally be moving from the start-up phase and into the production phase of our business plan."

About Chancellor Group

Chancellor Group, Inc. is an emerging small cap energy company involved in oil and natural gas production, and currently has oil and gas properties in Kansas, Texas, and Kentucky with substantial proved recoverable reserves. The company currently has approximately 29.7 million shares of primary common stock issued and outstanding, and 38 million shares fully diluted.

Chancellor Group web site: http://www.chancellorgroupinc.com

Investor Research (real audio): http://www.wallstreetnewscast.com/chag.html

Chancellor Group Yahoo Club: http://www.yahoo.com/clubs/chancellorgroup

Corporate profile also at http://www.oilandgasprofiles.com http://www.wallstreetdailypress.com

Certain information included in this communication contains statements that are forward looking, such as statements relating to the future anticipated direction of the industry, plans for future expansion, various business development activities, planned capital expenditures, future funding sources, anticipated sales growth and potential contracts. These forward looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual operations or results to differ materially from those anticipated.

CONTACT:

Chancellor Group, Inc.

Ashraf Khan, Chairman / CEO

[e-mail]

OR

Broker/Investment contact

Tom Bustamante, 212/233-9301

[e-mail]

KEYWORD: MASSACHUSETTS