July 27, 2004

NEWS RELEASE 
 
Loon Starts 2004 Drilling Program – Spuds Pt-123 Well
 
Loon Energy Inc. (“Loon”) (TSX-V:LEY) announces the spud of the Pt-123 well in the Petisovci field area of Slovenia.  Drilling, which started earlier today, is expected to continue for approximately 3 weeks.  Loon is paying 40% of the costs of the well and will have a 38% interest in any hydrocarbons produced before project payout and 30% thereafter.
 
The Pt-123 well will be drilled to a depth of approximately 2,100 metres at a location immediately to the northeast of and updip from the Petisovci field.  The wellbore will evaluate a number of targets, most of which have produced oil and/or gas within the Petisovci field area. 
 
The primary target of the well is the Petisovci (“Pt”) reservoir, a 200 metre (gross) thick reservoir sand that starts at a depth of approximately 1,600 metres.  The Pt reservoir contains multiple sand units, each about 10 metres thick, separated by shale sequences.  The Pt-123 well is expected to intersect seven of the Pt units, four of which have produced oil from the Petisovci field. 
 
In addition, the wellbore is expected to intersect reservoir quality sands belonging to the Paka, Middle Ratka, Lovaszi and Lower Ratka reservoirs at shallower depths.  Each of these secondary targets has produced oil and/or gas in the Petisovci field.
 
After the Pt-123 well has reached total depth, the rig will be moved approximately 2,000 metres to the northeast for the drilling of the D-14 well in the Dolina field area.  This well, which is subject to a farmout agreement with Grove Energy Limited (TSX-V:GRV), will be drilled at no cost to Loon.  Total depth for the D-14 well will be approximately 3,000 metres.  Primary target is natural gas in the Petisovci-Globocki or Pg reservoir.
 
The Petisovci and Dolina fields lie on a large anticlinal structure approximately 18 kilometres in length which continues east into Hungary.  Approximately 40% of the structure is in Slovenia.  The Lovaszi oil field, on the Hungarian side of the structure, has produced 50 million barrels of oil and 230 Bcf of gas.  The Petisovci-Dolina field area has produced 5.6 million barrels of oil and 34.3 Bcf of gas, less than 15% of the volumes produced at Lovaszi.  The Company believes that significantly more oil and gas can be produced from the Slovenian part of the structure.
 
Loon is focused on exploration and development projects in Slovenia and other countries in south-central Europe.  Slovenia is bounded by Croatia (south), Hungary (east), Austria (north) and Italy (west).  The principal project area is located in eastern Slovenia near to the borders with Hungary and Croatia approximately 210 kilometres south of Vienna, Austria and 180 kilometres northeast of Ljubljana, the capital of Slovenia.  Slovenia joined NATO in April, 2004 and the European Union (“EU”) on May 1 of this year.