February 18, 2005
TSX-V:LEY

NEWS RELEASE

Loon Negotiates Deal in Colombia

Calgary, Alberta, Canada, February 18, 2005 - Loon Energy Inc. (“Loon”) (TSX.V-LEY) is pleased to announce it has entered into an agreement with Kappa Energy Colombia Limited S.A. (“Kappa”) to explore for and produce hydrocarbons in the Republic of Colombia. Under the terms of the agreement, Loon will expend a minimum of US$6 million and will earn 49% of Kappa’s rights in the Abanico Association Contract area (~200,000 acres) located in the prolific Magdalena Valley of central Colombia.

As part of Loon’s obligation, it will undertake a 20 km2 3-D seismic program and will drill a minimum of four wells (3 exploration wells and 1 development well) on drill-ready prospects. Kappa’s existing producing property within the contract area, the Abanico Field, will be excluded from Loon’s earning arrangement.

A part of the minimum drilling obligation Loon will drill a development project targeting a proven gas deposit of 1-3 Bcf. This gas deposit, already-delineated by 3 wells currently producing from deeper horizons, is expected to provide Loon with near term cash-flow from the Colombian venture.

Three exploration wells will be drilled during the course of 2005 targeting potential recoverable reserves of 30 Bcf of natural gas, 100 million barrels of oil and 120 million barrels of oil respectively. One of the large reserve potential oil prospects is located approximately nine miles to the west of the Guando Field (120 million barrels of oil recoverable).

Loon and Kappa, as part of their arrangement, will be working up additional prospects on the Abanico Association Contract area and will also be targeting prospects on Kappa’s other undeveloped lands in Colombia. They will also form a strategic partnership and jointly work toward securing additional exploration and development projects elsewhere in Colombia.

Kappa is a registered acreage holder and operator in Colombia and has been actively exploring and producing in Colombia for seven years. In addition to having one of the largest acreage positions in Colombia (~ 800,000 acres), Kappa owns and operates three drilling rigs thereby ensuring timely and cost effective drilling operations. Kappa currently produces approximately 3,000 boepd in Colombia and is the operator of six exploration and production contracts.

The terms of the Abanico Association Contract provide that Ecopetrol, the oil and gas company owned by the government of Colombia, has the option to acquire a 50% interest, pro rata from Loon and Kappa, by paying 50% of the capital costs incurred prior to the exercise of the option.

The board of directors of Loon has approved the transaction subject to the completion of final technical due diligence and financing.

Colombia has a stable government, no currency restrictions and an established infrastructure and service industry. More than fifty companies have operations in Colombia including Nexen, Talisman, British Petroleum, Occidental Petroleum, Lukoil, Chevron-Texaco, Exxon-Mobil and a number of intermediate-sized companies such as Petro-Santander and Petrobank. Colombia currently produces approximately 580,000 boepd, more than half of which is exported – primarily to North America.

Some of the statements contained in this release may be 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.