Loon Energy Abandons Aleli-D1 Well in Colombia

Loon Energy reports that the Aleli-D1 well in Colombia will be plugged and abandoned.

The Aleli-D1 re-entry was spud September 21, 2005 and had reached a depth of 6,633' as of November 3, 2005, at which point drilling operations were suspended as the traveling block and its coupling were damaged. Due to the stoppage of operations, the drill string became stuck. By the 23rd of November the traveling block and coupling were repaired and the drill string fully recovered. The operator then conditioned the hole and logged the drilled section with the objective of casing the well and drilling ahead to 7,800' which was the targeted total depth for the Aleli-D1 well.

While casing the well, the drill string could not be released from the casing hanger and consequently the casing string was removed from the hole. During this delay Loon and the operator integrated the velocity data from the logs into the structural interpretation. As result of this work it was determined that a greater portion of the structure had been penetrated than had been previously believed and that the drilled section did not contain commercial amounts of hydrocarbons. Consequently the decision was made to plug and abandon the well.

The drilling of Aleli-D1 will fulfil, in part, Loon's commitment to expend a minimum of US$6 million to earn 49% interest of the interest of Kappa Resources Colombia Ltd. ("Kappa") in the Abanico Association Contract. Drilling operations are operated by Kappa. Earning is subject to the approval of Ecopetrol, the Colombian national oil company. The Contract area covers greater than 200,000 acres (greater than 300 square miles) in the Upper Magdalena Valley.

Loon expects to spud the next well in the Abanico program during the first quarter of 2006. A recently completed 3-D survey has defined several potential locations for the third Loon well.

Loon's first well in the on-going drilling program, Ventilador-2, encountered 80' of gas pay and tested up to 2.5 MMcf/d. Kappa has advised that they expect to be able to tie-in the Ventilador-2 well during the first quarter of 2006.