K2 Energy Commences Bow Island Production

K2 Energy has completed its pipeline and the first phase gathering system on the Blackfeet Indian Reservation in north central Montana connecting the Company's Palmer gas field that has begun producing out of the Bow Island Formation. This is the first gas production to be tied into a sales line from the Bow Island Formation on the Reservation by the Company. As expected with the wells in their initial clean-up phase, production volumes have been variable with production rates increasing as the fracture fluid cleans up and the wells continue towards achieving their full potential. Despite several interruptions, production rates from the wells have averaged a combined flow rate in excess of 250 thousand cubic feet of natural gas per day. With continued production, the wells will go through their clean-up pattern and the Company is confident that they will continue to significantly improve their production rate.

Additionally, the Company announces that it has received final approval from the Bureau of Indian Affairs on the previously announced amendment to the Company's Indian Mineral Development Agreement with the Blackfeet Tribal Business Council. By this amendment, the Company has acquired the rights to an additional 100,000 tribal mineral acres, with consent to lease an additional 100,000 acres of non-tribal lands, within a designated 200,000-acre land block on the Reservation. These lands represent a significant potential resource within the shallow gas play of the Bow Island Formation on the eastern edge of the Reservation.

The Bow Island Formation is a shallow, low-pressure gas reservoir. New drilling technology and the development of specific completion techniques have allowed the Company to drill, evaluate and commence initial production from this previously under-developed resource. In follow-up to the initial success of the Bow Island Palmer project, the Company entered into the above amended agreement with the Blackfeet Tribe to acquire the additional acreage.

The Company is currently designing a two-stage drilling program that is expected to provide significant growth in production by the end of the year. Design of the current production facilities have made it possible for the Company to quickly tie-in future drilling which will reduce sales delay and improve the economic return of the project. The management team of the Company continues to make every effort to reduce development costs and increase production rates to maximize the profitability of the project.


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