Loon Energy Inc.

Loon Energy Inc.

April 24, 2007 11:16 ET

Loon Signs Option Agreement for Brunei Block L

CALGARY, ALBERTA--(CCNMatthews - April 24, 2007) - Loon Energy Inc. ("Loon") (TSX VENTURE:LEY) announces that its wholly-owned subsidiary Loon Brunei Limited ("Loon Brunei") has signed an option agreement ("Agreement") with Nations Petroleum Brunei Limited ("Nations"), a wholly-owned subsidiary of Nations Petroleum Company Ltd.

Under the terms of the Agreement, and for a period of 12 months from the date of its execution, Loon Brunei has granted an option (the "Option") to Nations to acquire a 50% interest in the Production Sharing Agreement ("PSA") signed by Loon Brunei, and QAF Brunei Sdn. Bhd ("QAF") on August 28th, 2006 with Brunei National Petroleum Company Senderian Berhad ("PetroleumBRUNEI").

In consideration for granting the Option, Nations has agreed to fund 100% of all costs and expenses of acquiring, processing and interpreting a minimum of 300 km2 of onshore 3D seismic as well as certain other costs and expenses incidental to the implementation of the work commitment. The assignment of an interest to Nations after the completion of the seismic is subject to the approval of PetroleumBRUNEI and QAF.

PetroleumBRUNEI originally awarded the PSA to Loon Brunei (90%) and QAF (10%) on August 28, 2006 (see August 28, 2006 press release of Loon) following a joint bid by Loon Brunei and QAF. In the event Nations exercises the Option and is accepted by QAF and PetroleumBRUNEI, the working interests in Block L would become Loon Brunei 40%, Nations Brunei 50% and QAF 10%. In addition if at such time less than USD20.5 million has been spent in exploring Block L, Nations will fund 100% of all exploration costs and expenses incurred until such time as that level of expenditure has been incurred.

Under the terms of the PSA the Minimum Work Commitment includes an obligation to carry out the following work during the first three years of the PSA:

- reprocess all available existing seismic data, consisting of approximately 1,500 km;

- acquire 750 line km of on-shore 2D seismic data and 500 line km of 2D off-shore seismic data;

- acquire 500 line km of off-shore 2D seismic data;

- acquire 150 km2 of offshore 3D seismic data; and

- drill a minimum of two exploration wells to a minimum depth of 2,000 metres.

By letter dated March 2nd 2007, PetroleumBRUNEI, QAF and Loon have, subject to legal documentation, agreed to replace the existing 2D and 3D seismic acquisition commitment with a 300 km2 3D seismic acquisition program which is scheduled to commence in 2007.

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.

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
    Loon Energy Inc. (Dubai)
    Timothy M. Elliott
    Loon Energy Inc. (Dubai)
    Jock M. Graham