Galaxy Begins Output at CBM Properties in Powder River Basin

Galaxy Energy reports that initial production has commenced from several new wells in its coalbed methane (CBM) properties in the eastern portion of the Powder River Basin and provides the following operational update.

Glasgow and West Recluse properties - Campbell County, Wyoming

On November 9, 2004, production commenced from the first 15 newly drilled wells in the Glasgow area, following completion of a 1.5-mile, 12-inch delivery line connecting the wells to a compressor station on a Western Gas Resources gathering line. Wells in the Glasgow area are expected to dewater relatively quickly and management believes that it will be able to project average production rates from these wells by the end of 2004.

In the West Recluse area, where Galaxy has eight producing wells, the Company recently drilled and completed 13 additional wells. Construction of a gathering system for these new wells is underway and should be completed by the end of 2004. Drilling of at least 32 additional wells is planned at the West Recluse area over the next four months.

In its Glasgow and West Recluse properties, Galaxy has a 90% working interest in approximately 4,400 acres.

Pipeline Ridge, Ucross Ranch and Leiter properties - Sheridan County, Wyoming

In the western part of the Powder River Basin, Galaxy is developing its approximately 55,000 CBM acres in Sheridan County. Galaxy currently operates in three areas, where its working interests range between 99.5% and 100%.

At Pipeline Ridge, the company has drilled or is drilling a total of 32 production wells. Production is expected to commence by the end of January 2005 after completion of five water disposal wells, finalization of the completion process on about half of the drilled wells, and completion of the gathering system, which will then be tied into the Bighorn pipeline.

In the Leiter and Ucross Ranch areas, 45 production wells have been drilled to date and the drilling of up to 15 additional wells in the Ucross Ranch area is currently underway. Approximately 30 of the wells in these two areas have been completed and are waiting to be hooked up to the gathering system and pipeline, which is scheduled to be completed near the end of December 2004. The remaining wells are scheduled to be brought on production in early 2005.

Elsewhere in the Powder River Basin, Galaxy has budgeted the drilling of 23 additional wells (in which Galaxy would own 90% to 100% working interest) by the end of the first quarter of 2005. This will bring the total number of wells in the current phase of the company's CBM program to 183 wells. This represents approximately 30% of the estimated 600 CBM well locations identified on Galaxy's acreage.

Marc E. Bruner, Galaxy's Chairman and President, stated, "The commencement of production at Glasgow is an important milestone for Galaxy, as it is the beginning of what we believe will be a significant period of growth in gas production from our aggressive Powder River Basin development program. We look forward to reporting on our progress in the months ahead."

Galaxy Energy Corporation is an oil and gas exploration and production company focusing on acquiring and developing coalbed methane properties in the Powder River Basin of Wyoming and Montana.