December 7, 2004
TSX-V:LEY

NEWS RELEASE

Fracture Stimulation Program Underway in Slovenia

Calgary, Alberta, Canada, December 7, 2004 - Loon Energy Inc. (“Loon”) (TSX.V-LEY) are pleased to announce the start of the fracture stimulation program on the D-14 appraisal well in eastern Slovenia. The program comprises the perforation and fracturing of 4 intervals plus the perforation of a fifth interval which is not expected to require stimulation. These sandstone zones lie at a depth range of 2,350 to 2,785 metres within the Petisovci-Globocki (“Pg”) formation. Perforation of the zones commenced on December 5th, 2004 and was completed on the morning of December 6th, 2004. It is anticipated that the fracture stimulation will commence on December 8th and be completed around December 15th, 2004.

Extended well test operations will commence following completion of the stimulation programme. These tests will be designed to assess reservoir flow properties, well drainage radius and ascertain long term deliverability. Data gathered from this programme will be used to design future drilling and development activities. Initial results of the fracture stimulation program are expected during the week commencing December 20th, 2004.

D-14 was drilled in September / October 2004 to a depth of 2,805 metres and cased to total depth. The well is being 100% funded by Grove Energy Limited (TSX-V:GRV) as part of its commitment to spend no less than 4 million Euros to evaluate the gas potential of the Pg zone underlying Loon lands in eastern Slovenia. Upon the completion of this expenditure obligation, interest of Loon in the deep gas reservoirs will be 10.5%.

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.

The TSX Venture Exchange neither approves nor disapproves of the information contained herein.