BPZ Energy Signs Long-Term Drilling Contract for Peruvian Operations

BPZ Energy, Inc., an exploration, production and integrated power company with primary operations in Peru and Ecuador, reports the signing of a 24-month drilling contract with Petrex S.A., a South American subsidiary of Saipem SpA of Italy, to start the drilling campaign in the Company's 100%-owned Corvina gas field located in the offshore Block Z-1 in northwest Peru.

Management Comment

Manolo Zuniga, President and Chief Executive Officer of BPZ Energy, Inc. said; "Securing a large capacity drilling rig, configured to our specifications and under favorable terms, is a major step forward in the execution of our integrated gas-to-power strategy and in the development of our other assets. We have also secured a tender assist barge for the rig and have ordered the casing for the first two wells. Against the backdrop of a very tight market for drilling equipment and international oilfield services, I am delighted to report this important milestone for BPZ and its shareholders. Although we have much work ahead of us, as we move into the first half of 2006, we expect to see accelerating progress in the execution of the Corvina project, with drilling operations scheduled to be underway by June 2006."

BPZ Signs Contract for Drilling Rig

BPZ Energy, Inc. signed a contract with Petrex S.A., the Latin American subsidiary of Saipem SpA, a worldwide drilling and construction company of ENI Group, for a platform rig capable of drilling to 16,000 feet. The rig will be upgraded to meet the Company's specifications. BPZ Energy has agreed to subsidize the upgrade in exchange for a competitive fixed day rate over a period of 24 months. BPZ intends to utilize the rig for the initial development of the Corvina gas field and may also utilize it for the expected development of the Albacora oil field, and the potential appraisal wells in the Piedra Redonda gas field. The contract calls for BPZ to pay a $5.5 million fee to mobilize and upgrade the rig. It provides for the initial drilling of three wells plus the workover of the existing C-16X well in the Corvina gas field of Block Z-1, followed by the drilling of three optional wells. The new wells are expected to take approximately 45 to 50 days to drill and complete. Following the drilling of the Corvina gas field, the Company plans to utilize the rig to drill the Albacora oil field, located in the northern part of Block Z-1 with an initial drilling program consisting of six wells. The Company has also secured the tender assist barge required by the rig under a long-term lease at favorable rates, thus reducing its upfront expenditures.

Corvina Field Update

Refurbishment of the existing CX-11 platform located in the Corvina gas field continues as planned and is expected to be completed by March 2006. The Company intends to drill a total of six new wells from the CX-11 platform in addition to the workover of the existing C-16X discovery well. The first three locations will target proved undeveloped (PUD) and probable reserves, as well as deeper untested sands, and are located up-dip from the C-16X well. This well was drilled in 1982 and tested in 1994 at rates up to 16.6 MMcf per day over an extended period with no measurable drop in formation pressure. Drilling and successfully completing these wells will provide BPZ with the necessary gas deliverability and proved reserves to execute the gas-to-power project onshore Peru, as well as providing an established supply source for its planned gas pipeline to Ecuador.

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