Galleon Announces Sweet Light Oil Pool Discovery

Galleon Energy has made a major light sweet oil discovery in the Puskwa, Alberta, area of Peace River Arch.

According to the company, the discovery was made as part of a strategy to explore for high-impact, big-reserve base projects.

Galleon previously announced that the first Puskwa well (100 percent interest), located at 13-11-72-26W5M, flow tested at 2.7 mmcsfd of sweet natural gas and 75 boepd of natural gas liquids (525 boepd) from the Granite Wash zone. A second zone, the Beaverhill Lake, had not been tested at the time of the announcement.

The second well (100% interest), located at 16-32-71-26W5M, was drilled three miles from the 13-11 well with rig release on March 1, 2006. This well was drilled to a total depth of 10,354 feet and encountered 33 feet of oil pay with 14 percent weighted average porosity based on log analysis. The well flow-tested at a rate of 2,559 boepd (90 percent oil and 10 percent gas) on a 10.32-mm choke. Reservoir drawdown was 10 percent during the test. The quality of the light sweet oil is 38 degrees API.

Three other zones in the second well, including the Granite Wash, are expected to be gas-bearing (based on log analysis) but have not been tested.

Galleon has a 100-percent working interest in 31 sections of land in this area. Using 3D seismic data and geological mapping, the company has identified 28 locations in this area measuring six miles by four miles. A minimum of 10 to 12 wells will be drilled in 2006 to delineate the pool size. Two rigs have been contracted to drill continuously on this project.

The cost to drill and complete each well is approximately $1.5 million. Full development of the area, based on 26 to 30 wells, is expected to cost $59 to $65 million (this includes facility costs of $20 million).

Initial production of between 500 and 1,000 boepd is expected to be onstream by July 1, 2006. By year end 2006, production from the area is expected to reach 2,000 to 4,000 boepd. Full development of the program is expected to deliver 4,000 to 8,000 boepd in 2007. Average production rates are based on estimated drilling success rates of between 33 percent and 66 percent, which is less than the drilling success rate to date.

Light sweet oil production from the Beaverhill Lake zone will commence in May 2006 on a restricted rate until the oil battery is fully operational. A crude oil battery is scheduled to be constructed by December 31, 2006, with capacity of 10,000 barrels of oil per day.

Natural gas and NGL production from the Granite Wash zone is expected to be on stream subject to construction of a gas plant. The gas plant with initial capacity of 10 mmcsf/d is scheduled to be built in June 2006.

Galleon will report 2005 corporate reserve and financial results on March 17, 2006.