Loon Energy Inc.
TSX VENTURE : LEY

Loon Energy Inc.

June 02, 2006 10:33 ET

Proprietary Industries and Loon Energy Announce Governmental Approval for Acquisition of Oil and Gas Interests in Pakistan

CALGARY, ALBERTA--(CCNMatthews - June 2, 2006) - Proprietary Industries Inc. ("Proprietary or the Company") and Loon Energy Inc. (TSX VENTURE:LEY) ("Loon") announced today that Proprietary's wholly owned subsidiary Frontier Holdings Limited ("Frontier") has received final approval from the Ministry of Petroleum and Natural Resources, of the Government of Pakistan, to seven assignments of working interests in six Exploration Licences and one Development and Production Lease from Petroleum Exploration (Pvt.) Limited ("PEL"). These acquisitions were previously announced by Proprietary and Loon on April 18, 2006.

The Assignment Agreements were executed today in Islamabad by officials of the Government of Pakistan. Nigel McCue, President & CEO of Frontier, and Graham Garner, President & CEO of Proprietary, met with Mr. Amanullah Khan Jadoon, Minister of Petroleum & Natural Resources and Mr. Ahmad Wagar, Secretary of Petroleum. "We were very pleased with the welcome we received from the Government of Pakistan," said Mr. McCue, "the Minister assured us that we can count on the Government's full support."

The seven assignments cover a total area of 1,845,723 acres, with four interests being located in the prolific Central Gas Basin, two interests in the Lower Indus Gas and Oil Basin and one in the northern oil bearing Potwar Basin. The work programme associated with these interests calls for the shooting of an estimated 800 kms of 2D seismic and 100 km2 of 3D seismic and the drilling of 10 exploration wells and 14 development wells over a period of approximately 36 months.

Further details of the exploration and development interests acquired from PEL, who is the Operator for each block, are as follows:

Central Gas Basin:

The Central Gas Basin ("CGB") is a prolific gas producing area located within the onshore Middle Indus Basin of Pakistan. Several multi-tcf gas fields have been discovered in the CGB some as recently as in the early 1990's. The main producing gas reservoirs are Palaeogene carbonates, e.g. the Sui Main Limestone, plus the deeper, more recently discovered Lower Cretaceous Lower Goru Sandstones. The Mari gas field (7.9 tcf of gas) and the Qadirpur gas field (5.4 tcf of gas) are immediately adjacent to Frontier's interests.

Development and Production Lease

1) Block No 2768-6 ("Kandra Development and Production Lease")

Frontier's Interest 37.5%

(Other Interests: PEL 37.5%, Government Holdings (Private) Limited ("GHPL") - a division of the Ministry of Petroleum and Natural Resources 25%)

The Kandra Gas Field is a multi-tcf gas resource which received development approval by the Government of Pakistan in January 2006. The Field was discovered in 1957 with a well that tested at a rate of 5.6 mmscfd of low Btu gas, three further wells were drilled which tested at rates between 7.8 and 9.6 mmscfd, with the fourth well being drilled in 2004. The Field is located approximately 25 kms away from the city of Sukkur whose current electricity demand is being partially met by the Sukkur Power Station. Frontier and its partners are presently reviewing a number of development options for the Field geared towards power generation including the possible refurbishment of the Sukkur Power Station.

Frontier plans to commission a technical report in compliance with National Instrument 51-101 in connection with its interest in the gas field.

In consideration for the acquired interest Frontier will incur and pay 75% of the cost of the first 6 development wells up to an amount of US$2 million each. The development & production licence area covers 71,383 acres.

Exploration Licences

2) Block No. 2768-6 ("Kandra Exploration Licence") Frontier's Interest 47.5%

(Other Interests: PEL 47.5%, GHPL 5%)

In consideration for the acquired interest, Frontier shall incur and pay the next US$4 million of expenditures in drilling one well to the Lower Goru reservoir which lies beneath the Kandra Development and Production Lease at a depth of approximately 8,200 ft. Two wells drilled in 1957 and 1990 previously penetrated the Lower Goru reservoir and sampled high Btu gas. The exploration licence covers an area of 112,632 acres.

3) Block No. 2769-9 ("Mirpur Mathelo") Frontier's Interest 47.5%

(Other Interests PEL 47.5%, GHPL 5%)

In consideration for the acquired interest, Frontier shall incur and pay the next US$5 million of exploration expenditure to include the acquisition of seismic and the drilling of one well to a depth of approximately 11,200 ft. The Mirpur Mathelo Block lies between, and is adjacent to, the multi-tcf Mari, Miano and Qadirpur Gas Fields. The block covers 254,577 acres.

4) Block No. 2769-13 ("Salam") Frontier's Interest 50%

(Other Interests: PEL 50%)

In consideration for the acquired interest, Frontier shall incur and pay the next US$1.75 million of exploration expenditure to include the acquisition of seismic and the drilling of one well to a depth of approximately 7,200 ft. The Salam Block lies between, and is adjacent to, the multi-tcf Qadirpur Gas Field and the Badar Gas Field. The block covers 49,454 acres.

Lower Indus Basin:

The Badin North and South Blocks are situated in the main oil and gas province of Sindh in the onshore Lower Indus Basin and cover an area of 1,178,746 acres. The Badin North and South Blocks have been carved out of the previous Badin Block which until recently was operated by British Petroleum. The Badin Block contains 59 oil and gas discoveries which have been developed under separate Development and Production Leases. The main producing reservoirs are Cretaceous and Palaeocene sands.

5) Block No. 2468-6 ("Badin IV North") Frontier's Interest 50%

(Other Interests: PEL 50%)

In consideration for the acquired interest, Frontier shall incur and pay the next US$3.9 million towards exploration expenditure to include the acquisition of seismic and the drilling of one well to a depth of 9,850 ft. The terms of the Concession Agreement requires, amongst other things, the drilling of three wells, in total, to depths of 7,546 ft to 10,171 ft.

6) Block No. 2468-5 ("Badin IV South") Frontier's Interest 50%

(Other Interests: PEL 50%)

In consideration for the acquired interest, Frontier shall incur and pay the next US$4.5 million towards exploration expenditure to include the acquisition of seismic and the drilling of one well to a depth of 8,200 ft. The terms of the Concession Agreement requires, amongst other things, the drilling of four wells, in total, to depths of 8,200 ft to 10,171 ft.

Potwar Basin:

The Potwar Basin lies at the northern extremity of the Upper Indus Basin and is the oldest producing basin in Pakistan. The Basin is predominately oil-prone. Eocene and Palaeocene carbonates are the most productive reservoirs although more recent exploration targets are the deeper Permian formations.

7) Block No. 3272-12 ("Karsal") Frontier's Interest 50%

(Other Interests PEL 50%)

In consideration for the acquired interest, Frontier shall incur and pay the next US$4.5 million towards exploration expenditure to include the acquisition of seismic and the drilling of one well to a depth of 11,480 ft.

The Block contains the Karsal Field which produced 250,000 barrels of oil from three wells in a period of eighteen months during the early 1950's. The Karsal Field is also adjacent, and possibly structurally related to, the Balkassar Field located in the adjoining block; the Balkassar Field has produced approximately 45 mmbbls of oil to date. The Karsal Block covers 178,931 acres.

As a result of the receipt of the Governmental approval, the previously issued 14,958,838 common shares of Proprietary that were held in escrow pending such Governmental approval will be released and distributed as to 7,479,419 to each of Loon Energy Inc. and Nemmoco Petroleum Limited ("Nemmoco"). Such shares were issued to Loon and Nemmoco and held in escrow as consideration for the acquisition of Frontier by Proprietary from Loon and Nemmoco.

About Proprietary:

Proprietary is a principal merchant bank based in Calgary, Alberta. It is listed on the Toronto Stock Exchange trading under the symbol PPI.

About Loon:

Loon is an internationally focused oil and gas exploration company with offices in Calgary, Alberta & Dubai, United Arab Emirates. Loon, with current projects in Colombia, Slovenia, Syria and Brunei, is listed on the TSX Venture Exchange trading under the symbol LEY.

Forward-looking statements: This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the capability of Proprietary or Loon to execute and implement their future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.

Contact Information

  • Proprietary Industries Inc.
    Graham Garner, President
    Calgary, Alberta, Canada
    (403) 266-6364
    (403) 266-6365 (FAX)
    Email: info@proprietaryinc.com
    or
    Loon Energy Inc.
    Timothy M. Elliott, President
    Dubai, United Arab Emirates
    971-4-339-5212
    971-4-339-5174 (FAX)
    Email: tim@loon-energy.com
    or
    Loon Energy Inc.
    Norman W. Holton, Chairman
    Calgary, Alberta, Canada
    (403) 264-8877
    (403) 264-8861 (FAX)
    Email: norm@loon-energy.com