Avalon Closes Acquisition of Colombian Properties

Avalon Oil & Gas has closed its acquisition of a twenty percent (20%) interest in the Talora Block and a fifteen (15%) interest in the Mecaya Block, in Colombia, from Gran Tierra Energy, Inc. Avalon also announced that the first Talora Block operation, the re-entry and re-evaluation of the Manantiales well, has begun.

Avalon's CEO, Kent A. Rodriguez, stated "We are extremely pleased with the addition of these two blocks to our growing portfolio of oil and gas producing properties. The Talora and Mecaya Blocks will provide a foundation for many future acquisitions in Colombia. The reduced field size-based royalties, attractive fiscal terms from the Colombian Government, and low annual ground rents make the economics in Colombia quite compelling," Rodriguez added.

The workover of the Manantiales-1 well is the first of five prospects to be tested on the Talora Block. The 108,333 acre block is located in the Middle Magdalena Basin, approximately 75 km west of the capital city of Bogota. This prolific area is adjacent to and on trend with several oil producing fields including the 117 million barrel Guando field, operated by Petrobras, and the adjacent Mana field, which contains 10 wells which typically flow 500 to 600 BOPD of 30 degrees API oil from high quality sands at approximately 5,500 feet.

The Talora Block is well served by road and pipeline access, and is near the city of Neiva, which functions as the oil industry services and supply base. It is directly south of a number of oil fields which are currently under development or redevelopment. These include the Puli C, Rio Opia, Toqui-Toqui, and Ambrosia oil field which produce from Cretaceous sands at depths of less than 5,000 feet. Interoil of Norway recently announced that the first four wells in its planned 9 well program in the region have all been successful and are producing at rates of 300 to 500 BOPD per well. Pacific Stratus is also active in this region and is developing the 5 million barrel Puli B field which produces 32 degrees API oil. Avalon's partners in the Talora Block development include PEI, an independent Colombian operator of several exploration and development projects, and PetroSouth Energy.

"We are very excited about the potential reserves in the Talora Block. They are a strong complement to the existing production that will be realized in the short term from Avalon's investment in the Mecaya Block", commented Avalon Director Menno Wiebe. "In this transaction, Avalon is successfully executing our mandate to identify robust oil production assets in Colombia and evolve our growing property portfolio."

Avalon also acquired a 15% interest in the 74,000 acre Mecaya Block in the Putumayo basin from Gran Tierra Energy, Inc. This Block contains the Mecaya 1 oil discovery and two other wells which have tested oil. The Mecaya 1 was drilled by the Colombian National Oil Company, Ecopetrol, in 1989. The Mecaya 1 well tested approximately 650 BOPD of 27 ° API oil, with no water at a stable flow rate over a period of 24 hours. At the time of drilling, the Mecaya well was a considerable distance from infrastructure. With oil prices much lower than they are today, the development was considered too small (at 5 MMBO) to meet Ecopetrol's economic threshold in 1989. Today's market conditions favor this development, with oil produced in this area having a netback of approximately $70.00 per barrel. Current development plans include: building an access road, re-entering the Mecaya well and putting it on production. If the initial production demonstrates that the reserves are approximately 5 million barrels of recoverable oil as mapped by Ecopetrol, the field will be developed with additional wells.

Stephen Newton, Avalon Director, added "Avalon's performance has proven its business model of investing in producing properties with stable cash flows provides a consistent return on investment. With the company's expansion into these promising Colombian properties, Avalon is poised to deliver significantly increased returns."