August 28, 2006
TSX-V:LEY

NEWS RELEASE

Loon Signs Contract Area in Brunei

Calgary, Alberta, Canada, August 28, 2006 — Loon Energy Inc. ("Loon") (TSX.V-LEY) announces that a consortium led by Loon and QAF Brunei Sdn Bhd ("QAF"), has formally signed the Production Sharing Agreement ("PSA") with the Brunei National Petroleum Company Sendirian Berhad ("PetroleumBRUNEI") granting Loon and QAF the right to explore for and produce petroleum from Block L in Brunei Darussalam ("Brunei"). Brunei is located in south-east Asia on the northern coast of the island of Borneo.

Block L is 550,000 acres (2,253 square kilometres) in size covering much of eastern onshore Brunei but also containing an offshore component. There has been some historic production on Block L however no exploration or development activities have been undertaken by any company in this area in roughly 20 years. The giant Champion and Seria oil fields are located within 25 kilometres of the block.

Under the terms of the PSA for Block L, Loon's consortium will, in the first 3-year period;

• reprocess all available existing seismic data (approximately 1,500 kilometres)
• acquire 750 line kilometres of onshore 2D seismic data and 500 line kilometres of 2D offshore seismic data
• acquire 150 square kilometres of offshore 3D seismic data
• drill at least two exploration wells to a minimum depth of 2,000 metres
• expend a minimum of US$20.5 million in the first 3-year period

Loon had previously announced on February 7th, 2006 that its consortium had been awarded Block L subject to the finalization of a Production Sharing Agreement between Loon et al and PetroleumBRUNEI. Loon had commenced its initial evaluation of the potential of Block L during the middle of 2005 and submitted its initial proposal on January 3, 2006.

Loon currently holds a 90% working interest in Block L along with QAF Brunei Sdn. Bhd holding a 10% working interest. Loon has been designated as the operator for the block.

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.