August 29, 2005
TSX-V:LEY

NEWS RELEASE

Start of Drilling In Colombia

Calgary, Alberta, Canada — Loon Energy Inc. ("Loon") (LEY:TSX-V) is pleased to announce the start of its drilling program on the Abanico Block in Colombia.

Ventilador — The Ventilador-2 well, the first of a 3 to 4 well program to be drilled during the remainder of this year, started drilling on the 25th of August 2005. The well is targeting a shallow gas zone identified in earlier wells in the area.

Aleli — The drilling rig is now being moved to the Aleli-1 well location and drilling should start in early September. The Aleli-1 well will be drilled to a depth of 2,300 metres. The Aleli-1 well will target a large structure approximately 9 miles west of the Guando Field (Braspetro/Nexen) that holds reserves of 120 MMBO recoverable. The Aleli Prospect targets the same Guadalupe reservoirs that are productive at Guando.

Seismic — In addition to the commencement of the drilling program, the acquisition of 27 km² of 3-D seismic and 20 km of 2-D seismic is nearing completion. These programs will help define locations for subsequent wells in Loon's drilling program.

Loon is in the process of earning a 49% interest in the Abanico Block, excluding the currently producing reservoir in the Abanico field. The 200,000 acre block is located in the Upper Magdalena Basin in the Republic of Colombia. Loon will spend a minimum of US$6 million to earn a 49% interest in the Abanico Association Contract which covers the Abanico Block.

Under the terms of the agreement, Loon will expend a minimum of $6 million US to earn its 49% interest. The Aleli-1 well will be the first of the exploratory wells to be drilled.

Colombia has a stable government, no currency restrictions, and an established infrastructure and service industry. More than fifty companies have operations in Colombia. Current production is 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.