Loon Energy On Track with Slovenia Drilling Operations

Loon Energy reports that site preparations for the drilling of the D-14 appraisal well are complete and the well commenced drilling on Sunday, August 29, 2004. Drilling time is estimated to be 30-35 days to a projected total depth of approximately 2,900 meters. The D-14 well is being 100% funded by Grove Energy Limited as part of its Approved Work Program obligations. Loon has a 10.50% carried working interest in the well.

The D-14 well will target multiple reservoirs in the Petisovci-Globocki ("Pg") zone below 2,000 meters. The well location is approximately 2 kilometers northeast of, and more than 150 meters structurally higher than, wells which have produced almost 9 Bcf of natural gas from one of the Pg sands. The primary objectives of the well are to demonstrate continuity of both reservoir structure in the multiple gas-bearing Pg horizons expected to be encountered, to determine which of the gas-bearing zones have the most potential and to provide additional data for the design and planning of an optimal simulation program for the Pg.

Secondary targets including the Paka and Petisovci zones occur above 2,000 meters -uphole from the Pg zone. These zones will be logged and possibly tested prior to the intermediate casing of the well. Loon has a 30% interest in all of these shallower zones.

Pt-123 Well

A service rig has been moved to the location to evaluate zones indicated as prospective during the drilling, logging and MDT testing of the well. Actual testing of the first target zone will start in the next few days.

Loon is focused on exploration and development projects in Slovenia and other countries in south-central Europe. Slovenia is bounded by Croatia (south), Hungary (east), Austria (north) and Italy (west). The principal project area is located in eastern Slovenia near to the borders with Hungary and Croatia approximately 210 kilometers south of Vienna, Austria and 180 kilometers northeast of Ljubljana, the capital of Slovenia. Slovenia joined NATO in April, 2004 and the European Union ("EU") on May 1 of this year.