Galaxy Enters Talks on Sale of Powder River Basin Assets

Galaxy Energy (Amex: GAX) and its wholly owned subsidiary Dolphin Energy have begun discussions with unrelated companies regarding the potential sale of a portion of its leaseholds in the Powder River Basin in Wyoming following a decision by Galaxy and PetroHunter Energy Corporation, a related party, not to further extend their Purchase and Sale Agreement dated December 29, 2006, as amended. Galaxy intends to sell a portion of the Powder River Basin assets with sufficient market value to allow Galaxy to either fully repay or substantially repay its senior debt.

Dolphin owns an average 86% working interest in 197 oil and gas wells in the Powder River Basin. Twenty-two wells are currently selling gas at an average rate of about 490,000 cubic feet per day. The remaining wells are in various stages of dewatering, shut-in waiting on pipeline, or waiting to be completed.

Amex Update

In June 2007, Galaxy submitted a plan to the American Stock Exchange (Amex), to advise Amex of action the company has taken, or will take, that would bring Galaxy into compliance with all of Amex's continued listing standards. These actions included an agreement for proposed sale of Galaxy's oil and gas assets in the Powder River Basin to PetroHunter Energy Corporation, a related party. The agreement with PetroHunter expired on August 31, 2007 and will not be extended. Galaxy has communicated the new developments to the Amex and will submit a new plan demonstrating how the company intends to regain compliance with the exchange's continued listing requirements. No assurances can be given that Amex will accept the plan.