Rally Energy Ltd. — Capital/Financing Update 2003

Jun 23, 2003

MATERIAL CHANGE REPORT

Section 85(1) of the Securities Act (British Columbia) Section 146(1) of the Securities Act (Alberta) Section 75(2) of the Securities Act (Ontario) Section 81(2) of the Securities Act (Nova Scotia) And Similar Provisions of Other Provincial Securities Legislation

1. Reporting Issuer

The name and address of the reporting issuer is:

Rally Energy Corp. 2000, 715 - 5th Avenue S.W. Calgary, AB T2P 2X6

2. Date of Material Change

The material change occurred on June 13, 2003.

3.

Press Release

A press release reporting the material change was issued on June 16, 2003 at Calgary, Alberta.

4.

Summary of Material Change

Rally Energy Corp. announced the closing of a fully subscribed $8.5 million equity and debt financing managed by Jennings Capital Inc.

5.

Full Description of Material Change

Please see attached press release of Rally Energy Corp. dated June 16, 2003.

6. Reliance on Confidential Disclosure Provisions

None.

7. Omitted Information

None.

8. Senior Officer

For further information, please contact John G.F. McLeod, President and Chief Executive Officer of Rally Energy Corp. by phone at (403) 538-3709 or by fax at (403) 538-3705.

188446-322079 CAL_DOCS #1358726 v. 1

• 2 -

Statement of Senior Officer

The foregoing accurately discloses the material change referred to herein.

DATED June 18, 2003 at Calgary, Alberta.

RALLY ENERGY CORP.

By: (signed) John G.F. McLeod President and Chief Executive Officer

IT IS AN OFFENCE UNDER THE SECURITIES ACT AND THE SECURITIES REGULATIONS FOR A PERSON OR COMPANY TO MAKE A STATEMENT IN A DOCUMENT REQUIRED TO BE FILED OR FURNISHED UNDER THE ACT OR THE REGULATIONS THAT, AT THE TIME AND IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH IT IS MADE, IS A MISREPRESENTATION.

188446-322079 CAL_DOCS #1358726 v. 1

June 16, 2003

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Rally Energy Corp. Closes $8.5 Million Financing

Contact: John G.F. McLeod, President & CEO Tel: (403) 538-0000 Ron D. Johnston, Vice President Fax: (403) 538-3705 “RAL” -TSX Venture Exchange Website: www.rallyenergy.com

Rally Energy is pleased to announce the closing of a fully subscribed $8.5-million financing managed by Jennings Capital Inc. Net proceeds of approximately $7.9 million are to be used to finance development drilling activities in Rally's Issaran oil field in Egypt. $2.5-million was raised through a unit offering of common shares and warrants and $6.0-million was raised through an offering of 12% unsecured convertible subordinated debentures.

According to John McLeod, President & CEO, “proceeds of this offering allow Rally to proceed immediately with commencement of an expanded drilling program in Egypt. The first well in our program is expected to spud prior to the end of June.”

Development drilling will primarily target large undrilled areas of the Nukhul formation that have been identified.

Details of the offering are as follows:

The unit offering was priced at $0.85 per unit. 2,941,177 units were issued. Each unit consists of one common share and one-half of a common share purchase warrant. Each full warrant is exercisable for $1.00 per common share on or before Dec. 31, 2004. An agent's commission of $174,000 was paid in relation to unit subscriptions. In addition, 205,882 agent's warrants were issued to the agent. Agen t's warrants are exercisable for $1.00 per common share on or before Dec. 31, 2004.

The $6.0 million, 12% unsecured convertible subordinated debentures are entitled to semi -annual interest payments and mature on July 1, 2006. The debentures are convertible, at the option of the holder, at any time prior to July 1, 2005, into common shares at a conversion price of $1.00 per common share. After July 1, 2005, the conversion price increases to $1.10 per common share. The debentures are not redeemable by Rally prior to Jan. 1, 2005. Thereafter, debentures are redeemable at par, in whole or in part, if the closing price of Rally's common shares is at or above $2.00 for 30 consecutive trading days. An agent's commission of $420,000 was paid in relation to debenture subscriptions.

FORWARD LOOKING STATEMENTS

This press release may contain forward-looking statements including expectations of future production, cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price, price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors that could affect the Corporation's operations or financial results are included in the Corporation's reports on file with Canadian securities regulatory authorities and at www.sedar.com.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Suite 2000, 715 – 5[th] Avenue S.W., Calgary, Alberta, Canada T2P 2X6 Telephone: 403.538.0000 Facsimile: 403.538.3705