Galaxy Energy to Sell Powder River Assets

Galaxy Energy and its wholly owned subsidiary Dolphin Energy Corporation have signed a non-binding letter of intent with PetroHunter Energy Corporation under which the parties agree to negotiate and attempt to reach final agreement for the purchase of all of Galaxy's and Dolphin's oil and gas interests in the Powder River Basin of Wyoming and Montana.

Under the letter of intent, signed on October 23, 2006, PetroHunter has stated its intention to pay $45 million to acquire Dolphin's interest, with $20 million to be paid in cash and $25 million to be paid in PetroHunter common stock. The parties have committed to negotiate and attempt to enter into a Purchase and Sale Agreement ("PSA") within the next thirty days. The PSA will be subject to PetroHunter obtaining financing on terms acceptable to PetroHunter, approval by Galaxy's senior lenders, and various other terms and conditions.

Dolphin owns an average 86% working interest in 197 oil and gas wells in the Powder River Basin. Twenty-two wells are currently selling gas at an average rate of 850,000 cubic feet a day. The remaining wells are in various stages of dewatering, shut-in waiting on pipeline, or waiting to be completed.

Galaxy Energy has determined not to proceed with a Purchase and Sale Agreement for the sale of Galaxy's interest in its unconventional natural gas properties in the Piceance Basin of Colorado with Exxel Energy Corporation's wholly owned subsidiary, Exxel Energy (USA) Inc. Galaxy intends to retain ownership of its Piceance Basin interests at this time.

Galaxy Energy Corporation, a development stage oil and gas exploration and production company, is focusing on acquiring and developing coalbed methane in the Powder River Basin of Wyoming and other unconventional natural gas properties in the Piceance Basin of Colorado, in addition to exploration activities in Germany and Romania. The Company conducts its exploration activities through two wholly owned subsidiaries, Dolphin Energy Corporation and Pannonian International, Ltd.

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