Rally Energy Gets Approval for Safed Koh Development Plan

Safed Koh Block, Pakistan
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Rally Energy says that the Government of Pakistan has approved the "Declaration of Commercial Discovery and Development Plan" submitted by the joint venture partners of the Safed Koh Concession in Pakistan. The Corporation has a 22.5% working interest in the Safed Koh Concession gas and condensate discovery made in March 2005 through the re-entry and deepening of an existing well, Rodho 3, into the Cretaceous age Lower Goru Formation. This gas discovery was re-confirmed in June 2005 through the re-entry and deepening of another existing well, Rodho 2, located 1.2 km north of the Rodho 3 discovery well. This formal government approval now allows independent engineers to include new Safed Koh reserves estimates in the Corporation's 2005 reserves evaluations.

The two Rodho discovery and appraisal wells have production tested commercial quantities of hydrocarbons at cumulative rates of 20 MMCF/D of gas and 100 BBLS/D of condensate. Both wells have been completed as gas and condensate producers.

Approved development of the Rodho Field (re-named Salsabil Field) includes:

A) Construction of production facilities and 22 kilometers of 10" pipeline, to commence in the first quarter of 2006, at an estimated cost of US$5.0 million (US$1.1 million net to Rally Energy).

B) Phase I - Production will commence at an expected rate of 15-25 MMCF/D in the second quarter of 2006. Initial discussions with Sui Northern Gas Pipeline Company ("SNGPL") have led to agreement on a limited time waiver of higher CO2 content (6.1%) thereby enabling the joint venture to immediately deliver gas into SNGPL's infrastructure. The current wellhead gas sales price is US$2.55/MCF.

C) Phase II - Production is to increase to 40-60 MMCF/D in March 2007 after processing facilities are equipped with amine sweetening to remove CO2 and after drilling of two additional Rodho development wells during the fourth quarter of 2006 and first quarter of 2007.

"The Dewan Group, operator of the Safed Koh Concession, has done an excellent job completing the development plan and receiving necessary approvals. The anticipated addition of approximately 800 BOE/D (net) to Rally Energy's production in the second quarter of 2006, increasing to in excess of 2,000 BOE/D (net) by 2007, is a significant development for Rally Energy. This new production will provide us with a third source of revenue and will move us closer to achieving our targets." said Abby Badwi, President and CEO of the Corporation.

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