Blast Energy Completes Acquisition of Eagle Domestic Drilling

Blast Energy Services has completed the acquisition of Eagle Domestic Drilling Operations, LLC for a nominal $50 million in cash and 1.5 million shares of Blast common stock. Blast is purchasing this Texas-based drilling rig contractor from the members of a privately held company. The acquisition of Eagle was financed using $35 million from a Senior Debt Facility from Laurus Master Fund Ltd. and a $15 million private placement of common equity. Through the acquisition of Eagle, Blast will immediately gain three operating drilling rigs, which are currently generating revenue and positive cash flow and an additional two rigs under final construction that are scheduled for field deployment in October. Blast has also contracted with an affiliate of the selling group for consulting services, which includes the building of a sixth rig scheduled for delivery in late 2006.

"This transaction completes the transformation of Blast into a viable operating company in the energy service sector," said John O'Keefe and David Adams, Co-CEOs of Blast Energy Services, Inc. "The new business significantly improves our balance sheet and provides a profitable platform from which to grow the company and allows greater flexibility in the development of our abrasive jetting and satellite business lines. We will now focus on the integration of the existing Eagle drilling operations into Blast and the deployment of the three additional rigs under construction on a timely basis."

In addition to the physical rig assets, Eagle has five of the six rigs signed to two-year, term drilling contracts with two major Texas based independent oil & gas companies. These customers have contracted the rigs to operate in the prolific Barnett Shale play in Texas and the emerging Fayetteville Shale play in Arkansas. In additional to the drilling rig crews being transferred to Blast, Richard D. Thornton, the VP of Operations for Eagle, will be joining the Blast senior management team in the same capacity.

Based upon the existing two-year contracts and once the sixth rig has been put into operation, Blast management is projecting that Eagle will be capable of generating annual revenues of $39 million with an annual EBITDA of approximately $19 million. With this acquisition, Blast management expects the Company to be both profitable and cash flow positive during 2007. Despite the issuance of stock and warrants in the acquisition and related financing terms, management further expects the overall result to be accretive to both earnings per share and cash flow per share.

Financing terms for the acquisition include a three-year Senior Debt facility for $40.6 million from Laurus Master Fund, Ltd, $35 million of which was used to close the acquisition. The facility carries interest rates of prime plus 2.5% and 30% warrant coverage. Blast has also entered into a private placement with members of the selling group to purchase 15 million shares of common stock at $1.00 per share. This placement includes 33% warrant coverage. The private placement was directly negotiated between the parties and the debt financing was privately arranged by a broker for cash fees and limited warrant coverage.

In related news, the Company's prototype abrasive fluid jetting (AFJ) rig has completed its latest field tests at the Many, Louisiana location. Blast is now in discussions with the Department of Energy to deploy the Blast Rig #1 to the Rocky Mountain Testing Facility in Wyoming to further test and evaluate the rig's cutting and jetting capabilities. Meanwhile, Alberta Energy Partners, our AFJ technology partner, will be making modifications to the down hole equipment and nozzle design to access reservoir formations laterally.


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