Loon Energy Inc.
TSX VENTURE : LEY

Loon Energy Inc.

July 27, 2005 09:00 ET

Loon Energy Inc.: Program Update- Colombia

CALGARY, ALBERTA--(CCNMatthews - July 27, 2005) - Loon Energy Inc. (TSX VENTURE: LEY) ("Loon") advises that its drilling program on the Abanico Block in Colombia is expected to begin during August with both the Ventilador-2 (shallow) and the Aleli-1 (deep) well expected to be drilling before the end of that month. Loon had earlier announced that it anticipated the start of drilling in late June. However, the spud dates have been delayed due to rig availability. These are the first two wells of a 3 to 4 well program to be drilled by Loon during the remainder of the calendar year as a part of the earning commitment outlined in our news release of February 18, 2005.

Aleli-1

The Aleli-1 well will be drilled to a depth of 2,300 metres and will target a potential oil accumulation in a large structure approximately 9 miles to the west of the Guando Field (Braspetro/Nexen). The Guando field holds recoverable oil reserves of approximately 120 million barrels and the Aleli Prospect targets the same Guadalupe reservoirs that are productive at Guando. Oil pipelines, which could be used to ship oil produced at Aleli to market, lie within several kilometers of Aleli. The anticlinal structure at Aleli, assuming a pay thickness similar to that at Guando is encountered, could hold recoverable oil reserves in excess of 100 million barrels.

Ventilador-2

The Ventilador-2 well will be drilled to a depth of 500 metres and will target the Barzalosa sand unit. The well is designed to exploit shallow gas reserves previously discovered above the main oil producing reservoirs in the Abanico field. It will offset an earlier well (Ventilador-1) that contains 50' of logged gas pay in the Barzalosa sands immediately above the producing Guadalupe sands. The targeted pool accumulation is estimated to contain between 1 to 3 Bcf of gas. Kappa Colombia Limited SA ("Kappa") has agreed to purchase a portion of the gas produced by the Ventilador-2 well to generate power for field operations in their Abanico field. Any excess production will be sold through the local distribution network which may be accessed within 1 kilometre of the well location.

Seismic

The acquisition of a 27 km2 3-D seismic survey and 20 kilometres of 2-D seismic is currently underway. The 3-D and 2-D surveys will help define locations for subsequent wells in Loon's drilling program.

Deal Summary

The wells are being drilled pursuant to an agreement between Loon and Kappa Resources Colombia Ltd. ("Kappa"), a privately held oil and gas exploration and production company, under which Loon will acquire a 49% interest in the Abanico Association Contract area located in the Upper Magdalena Valley area of central Colombia. The contract area comprises more than 200,000 acres (more than 312 square miles).

Under the terms of the agreement, Loon will expend a minimum of $6 million US to earn its 49% interest. The Aleli-1 well will be the first of the exploratory wells to be drilled.

Colombia

Colombia has a stable government, no currency restrictions and an established infrastructure and service industry. Colombia currently produces approximately 580,000 boepd, more than half of which is exported - primarily to North America.

Some of the statements contained in this release may be forward-looking statements. Forward-looking statements may include, but are not limited to, statements concerning estimates of recoverable hydrocarbons, expected hydrocarbon prices, expected costs, statements relating to the continued advancement of the Company's projects and other statements which are not historical facts. When used in this document, and in other published information of the Company, the words such as "could," "estimate," "expect," "intend," "may," "potential," "should," and similar expressions are indicative of a forward-looking statement. Although the Company believes that its expectations reflected in the forward-looking statements are reasonable, the potential results suggested by such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors, which could cause actual results to differ from these forward-looking statements, include the potential that the Company's projects will experience technical and mechanical problems, geological conditions in the reservoir which may negatively impact levels of oil and gas production and changes in product prices and other risks not anticipated by the Company or disclosed in the Company's published material. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties.

The TSX Venture Exchange neither approves nor disapproves of the information contained herein.

Contact Information

  • Loon Energy Inc. (Calgary)
    Norm Holton
    (403) 264-8877
    (403) 264-8861 (FAX)
    Email: loon@loon-energy.com
    Website: www.loon-energy.com
    or
    Loon Energy Inc. (Dubai)
    Tim Elliott
    +971-4-339-5212
    +971-4-339-5174 (FAX)
    or
    Loon Energy Inc.
    Canada Office
    1950, 700-4th Avenue S.W.
    Calgary, Alberta, T2P 3J4, CANADA
    or
    Loon Energy Inc.
    Dubai Office
    123 Umm Suqeim Building
    Shaikh Zayed Road, Al Quoz
    Dubai, United Arab Emirates