Kappa Inks JV with Loon Energy on Colombian Contract

Kappa Resources Colombia Ltd. has entered into a farmout agreement with Loon Energy. The agreement provides Loon the opportunity to participate in, and earn a significant interest in Kappa's 200,000 acre Abanico Association Contract located in the prolific Upper Magdalena Valley of Colombia. A Joint Venture was negotiated in order to accelerate and expand exploration efforts in the Contract. This strategy will greatly enhance the probability of making another major oil discovery similar in size to the offsetting Guando Field (100-120 MMBO) discovered by Nexen and Braspetro in 2000.

Under the terms of the Farmout Agreement, Loon will expend a minimum of US$6 million to earn 49% of Kappa's rights to the Abanico Association Contract. Kappa's existing producing property within the contract area, the 2700 BOPD Abanico Field, is excluded from Loon's earning arrangement. As part of Loon's obligation, it will participate in a 20 km(2) 3D seismic program and drill a minimum of 1 development and up to 3 exploratory wells. The development well is designed to exploit shallow, non-associated gas reserves (1-3 Bcf) previously discovered by Kappa above the main oil producing reservoirs in the Abanico Field. The exploratory wells will target up to 3 drill-ready prospects with combined recoverable reserves potential of up to 220 MMBO and 30 Bcf gas.

Kappa and Loon have now finalized plans for an aggressive 2005 work program. Seismic acquisition is scheduled to begin shortly, with "continuous" drilling operations commencing in late June. Kappa has agreed to place its drilling fleet at the disposal of the Joint Venture, which will ensure rig availability.

In addition to the Abanico Joint Venture, Kappa and Loon are contemplating expanding their relationship into other areas of Colombia. Preliminary discussions have identified several exploration and development projects of mutual interest to both companies.


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