Loon Energy Inc.

October 5, 2004

NEWS RELEASE

Loon Makes Gas Discovery in Slovenia

Loon Energy Inc. (“Loon”) (TSX-V:LEY) is pleased to provide an update on activities in Slovenia.

Pt-123 Well
A gas zone, encountered in the Pt-123 wellbore at a depth of 1,530 metres, has been production tested. The zone produced dry gas at a stabilized rate of 600 mcfd (100 boepd) after a two day production test. It is expected to be producing on a regular basis by the end of October.

The producing zone has net gas pay of more than 5 metres. Based upon mapping of older wells the zone appears to occur over an area of approximately five square kilometres. The pool is expected to contain 2 to 4 Bcf of recoverable gas. However, a precise determination of recoverable reserves will only be possible after the well has been on production for some time.

The Pt-123 is the first well drilled by Loon in Slovenia. Loon paid 40% of the costs of the well and will receive 38% of net revenue prior to payout and 30% thereafter.

D-14 Well
Current well depth is 2,720 metres. Intermediate casing was set to a depth of 1,803 metres in mid-September. Logging of the shallow part of the well, prior to the running of the intermediate casing, indicated an uphole gas zone but equipment constraints and the condition of the wellbore precluded openhole testing.
The primary targets of the D-14 well are multiple reservoirs in the Petisovci-Globocki (“Pg”) zone below 2,000 metres. The well location is approximately 2 kilometres northeast of, and more than 150 metres structurally higher than, wells which have produced almost 9 Bcf of natural gas from one of the Pg sands. The objectives of the well are to demonstrate continuity of both reservoir structure in the multiple gas-bearing Pg horizons expected to be encountered, to determine which of the gas-bearing zones have the most potential and to provide additional data for the design and planning of an optimal simulation program for the Pg.

The D-14 well is being 100% funded by Grove Energy Limited as parts of its Approved Work Program (“AWP”). Subsequent to completion of the AWP, Loon will have a 10.5% working interest in all of the potential reservoir sands in the Pg zone. The interest of Loon in the zones above the Pg zone, including the zone which indicated gas in the shallower part of the well, will remain at 38% before project payout and 30% after project payout.

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.

Forward Looking Statements - Some of the statements contained in this release are forward-looking statements. Forward-looking statements may include, but are not limited to, statements concerning estimates of recoverable hydrocarbons, expected hydrocarbon prices, expected costs, statements relating to the continued advancement of the Company’s projects and other statements which are not historical facts. When used in this document, and in other published information of the Company, the words such as “could,” “estimate,” “expect,” “intend,” “may,” “potential,” “should,” and similar expressions are indicative of a forward-looking statement. Although the Company believes that its expectations reflected in the forward-looking statements are reasonable, the potential results suggested by such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors, which could cause actual results to differ from these forward-looking statements, include the potential that the Company’s projects will experience technical and mechanical problems, geological conditions in the reservoir which may negatively impact levels of oil and gas production and changes in product prices and other risks not anticipated by the Company or disclosed in the Company’s published material. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties.

Barrels of Oil Equivalent – Boe may be misleading, particularly if used in isolation. A boe conversion ratio of six mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The conversion ratio is an industry accepted norm and is not based on either energy content of current prices.