Loon Announced Positive Results for Delta-1 Well Tests

Loon Energy Inc. announced that the Delta-1 sidetrack has been cased and the initial indications are that the well is capable of oil production.

The initial wellbore reached total depth of 8,183 feet (2,494 meters). The target zone intersected in the initial wellbore, the Rosa Blanca limestone in the Caballos Formation, had a gross thickness of 156 feet, and was intermittently oil-stained throughout with the best oil shows and higher gas content in the top 80 feet of the zone. The initial wellbore of the Delta-1 well was directionally drilled to intersect the target zone approximately 250 metres from the surface location of the Gualanday-3 oil discovery drilled in 1957. The Gualanday-3 well had initial test rates of 100 to 393 barrels of 37 degrees API oil per day and produced oil during six years of sporadic production from a gross reservoir section of more than 170 feet. The initial Delta-1 wellbore encountered the primary objective approximately 254 feet lower than in the Gualanday well.

Loon announced that it was drilling a sidetrack hole and that the original wellbore had been plugged back to 2,515 feet (767 meters) due to operational difficulties. The sidetrack was eventually drilled to 7,988 ft' (2,435 meters) encountering 68 feet (22 meters) of indicated potential oil pay in the Rosa Blanca reservoir more than 200 feet structurally higher than in the initial wellbore. The well was cased to a depth of 7,980 feet (2,432 meters) after logging and a 46 foot (14 meter) section of the reservoir was perforated, acidized and swab tested. Although the well is still cleaning up, swabbing rates are indicative of production capability in the range of 60 to 100 barrels of oil per day and 20 to 25 barrels of water per day. Oil gravity was measured at 32-34 degrees API. Preparations are underway for the installation of a jet pump after which a prolonged production testing program will commence. The Delta-1 well is located within a 60,817 hectare block of lands covered by the Buganviles Association Contract (the "Contract") between Holywell Resources S.A. and Ecopetrol, the national oil company of Colombia. In the event that the well is productive, fifty percent of the lands or approximately 75,000 acres will be retained for a period of two years. In the event that the well does not flow at rates considered commercial, the lands will expire. Under the terms of an agreement with Kappa Energy Colombia Limited S.A., Loon participated through Kappa in an arrangement between Kappa and Holywell to earn a 20% working interest in the well and any of the retained lands.