Loon Energy Inc.
TSX VENTURE : LEY

Loon Energy Inc.

April 24, 2007 11:06 ET

Loon Energy Inc.: Status of Brunei Block L

CALGARY, ALBERTA--(CCNMatthews - April 24, 2007) - Loon Energy Inc. ("Loon") (TSX VENTURE:LEY) wishes to provide information on the status of its interest in Brunei.

On August 28, 2006 (see August 28, 2006 press release of Loon), Brunei National Petroleum Company Senderian Berhad ("PetroleumBRUNEI") awarded Loon's wholly-owned subsidiary Loon Brunei Limited ("Loon Brunei"), a 90% interest in a Production Sharing Agreement ("PSA") covering Block L in Brunei Darussalam ("Brunei"). The remaining 10% interest in the PSA was awarded to QAF Brunei Sdn. Bhd ("QAF") who participated with Loon Brunei in a joint bid to PetroleumBRUNEI for the interest. Block L is 550,000 acres (2,253 km2) in size covering much of eastern onshore Brunei but also containing an offshore component. There has been some historic production on Block L, however, no exploration or development activities have been undertaken in this area in approximately 20 years. The giant Champion and Seria oil fields are both located within 25 km of Block L. Brunei is located in south-east Asia on the northern coast of the island of Borneo. It occupies a total area of 5,770 km2 of which 5,270 km2 is land.

On August 29, 2006, subject to the consent of PetroleumBRUNEI, Loon Brunei agreed to assign a 40% interest in the PSA to Bumico Sendirian Berhad ("Bumico"), a corporation organized in Brunei, and an application was submitted by Loon Brunei to PetroleumBRUNEI seeking consent for this assignment. On September 28, 2006, PetroleumBRUNEI advised Loon that it would not approve the assignment.

Since that time, Loon became aware of various assertions being made by Bumico and/or Integra Mining (B) Sendirian Berhad ("Integra"), a corporation organized in Brunei and an affiliated entity to Bumico, that, despite Integra and Bumico having executed documentation with Loon and Loon Brunei expressly stating the contrary, Loon or Loon Brunei is a trustee of a 40% interest in the PSA in favour of Integra or Bumico.

In order to fully and expeditiously protect their legitimate interests in the PSA, on March 14, 2007, both Loon and Loon Brunei commenced legal proceedings in the English High Court (the "High Court") in London, England for appropriate declaratory and other relief and applied to the High Court for an order that would allow for the matter to be handled in an expedited manner. The hearing for that application was heard on April 17, 2007, at which time counsel for Bumico/Integra appeared.

Loon has also become aware of actions having been taken by Bumico and Integra to commence arbitration proceedings in the State of Texas, U.S.A. These proceedings are, in the opinion of Loon, a further attempt to advance the same assertions that are now the subject matter of the proceedings in the High Court in England.

Upon initially becoming aware of the assertions of Bumico and Integra, to the extent that it was possible to comprehend them, Loon considered them and, together with its legal advisers in both Canada and the United Kingdom, concluded that they were baseless and without any merit. As a result of that assessment Loon commenced the action in the High Court. Loon intends to take all further action that it considers necessary to fully protect its interest in the PSA.

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)
    Norman W. Holton
    (403) 264-8877
    or
    Loon Energy Inc. (Dubai)
    Timothy M. Elliott
    +971-4-339-5212
    or
    Loon Energy Inc. (Dubai)
    Jock M. Graham
    +971-4-339-5212