Rally Makes Major Gas Discovery in Pakistan

Rodho Area, Pakistan
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Rodho Field, Pakistan
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Rally Energy reports that initial testing of the Rodho No.3 re-entry well in the Safed Koh Block has established the presence of natural gas accumulations in the Cretaceous Lower Goru Sandstones. A "Notice of Discovery" was sent to the Director General, Petroleum Concessions, Pakistan, on March 8, 2005. This Notice outlined the details of the discovery and included the following statement: "The commercial flow of hydrocarbons from the Lower Goru formation in Rodho-3 well is significant, as it has for the first time confirmed the presence of hydrocarbons in the deeper horizons of the Safed Koh Range, located in the Middle Indus Basin of Pakistan."

The Rodho No. 3 well, drilled to a target depth of 2,758 meters, was tested through two cased-hole drill stem tests over four prospective gas-bearing sandstone intervals. These tests measured a flow rate of 5.0 mmcf/d with 22 bbls/d of 43 degree API condensate through a one inch choke. No water was produced. Tested gas had a gross heating value of 1,027 BTU per mcf. Analysis of the test information indicates significant formation damage, thus stimulation through fracing should result in a material increase in tested flow rates. Assessment work will continue over the next few weeks for field appraisal and preliminary development plans. No material expenditures are expected to be incurred by Rally Energy in connection with Rodho No. 3 drilling, completion and testing activities since the Corporation is carried for its 22.5% working interest on the first US$1.6 million of expenditures on this well.

The gas bearing structure being tested through the Rodho Well No.3 has extensive aerial extent, estimated at approximately 14 square kilometers, with a maximum vertical closure of over 450 meters. Based on the lowest log indication, the well has proven a gross structural gas column of 170 meters. Management believes this is a very significant natural gas reservoir with the potential to add substantial reserves and production. Confirmation of the presence of a substantial gas reservoir also establishes very attractive exploration potential in two additional structures within the Safed Koh Block with significant aerial extent. Of particular interest is the Afiband structure located four kilometers south of the Rodho feature. Geophysics at Afiband outlines a structure of approximately 50 square kilometers in size with vertical closure of approximately 300 meters at depths comparable to the encountered Rodho formations.

Development Plan Timing for Rodho No.3

Under the terms of the Safed Koh Concession Agreement, Rally Energy and its working interest partners have informed The Director General, Petroleum Concessions, Pakistan ("DGPC"), of the Rodho No. 3 Discovery and must, within three months of completion of testing, advise DGPC as to whether this Discovery merits Appraisal. An Appraisal Program must be submitted for DGPC approval, followed by a notice in writing that declares whether or not the Discovery is a Commercial Discovery or a Significant Gas Discovery. A Discovery Area will subsequently be delineated and a Development Plan will be prepared for approval by DGPC.

Rodho No.2 Well

The Rodho No. 2 well is located approximately 1.3 kilometers north of Rodho No. 3. As an immediate follow-up to Rodho No.3, the technical feasibility of deepening Rodho No.2 is being investigated to allow for further appraisal of the gas bearing Lower Goru formation. The Rodho No.2 deepening may extend to the prospective Chilton Jurassic Limestone. The Corporation is carried for its 22.5% working interest on the first US$530,000 of expenditures on this well.

Area Gas Markets

Safed Koh gas production can be marketed through the existing Sui Northern gas pipeline which passes within 12.5 kilometers of the Rodho No. 3 wellsite. Alternatively, the gas can be delivered to the Dhodak facilities servicing the Dhodak Gas Field, a distance of approximately 15 kilometers. Current area gas demand is significantly in excess of supply. Area gas pricing is currently US $2.55/mcf.

Safed Koh

Rally Energy's Safed Koh Block, covering 1,213 square kilometers, is located in the Province of Punjab, immediately south of the Dhodak gas field, Pakistan's largest gas and condensate producing field. The Dhodak Field, with an estimated 620 Bcf of proven gas reserves and 30 million barrels of condensate, is located in the Central Indus Basin approximately 15 kilometers north of our Saked Koh Block. In April, 30% of the current Safed Koh Block concession area, as selected by the working interest holders, will be surrendered to the Pakistan Government under mandatory concession relinquishment provisions.

Rally holds a 22.5% working interest in the Safed Koh Block in Pakistan.

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