Galleon announces 2007 reserves, production and financial results



    CALGARY, March 12 /CNW/ - Galleon Energy Inc. ("Galleon" or the
"Corporation") announces record corporate reserves, production and strong
financial results in 2007.

    2007 Performance

    Volume growth in 2007 has delivered significant value. The successful
development and expansion of the three key projects, Puskwa, Dawson Montney
gas and Eaglesham, will provide sustainable growth for the future.

    
    -   Drilled 93 gross wells resulting in 49 (44.5 net) natural gas wells,
        29 (26.7 net) light oil wells and 5 (3.6 net) heavy oil wells; a
        success rate of 89%;
    -   Converted 6 of 7 exploration initiatives into producing properties;
    -   Averaged daily production of 13,429 BOE: natural gas - 45.7 Mmcf and
        crude oil and NGLs - 5,813 bbl, an increase of 43% from 2006; with an
        operating netback of $29.14/BOE;
    -   Gross proved reserves and proved plus probable reserves grew to
        34.1 million and 59.5 million BOE, respectively;
    -   Gross proved plus probable reserve life index was 11.1 years based on
        average Q4 2007 production;
    -   Production on a proved plus probable basis was replaced 2.9 times;
    -   Gross proved plus probable reserves were 37% light oil, 42% natural
        gas, 19% heavy oil and 2% natural gas liquids;
    -   Access to over 1 million gross acres of land, approximately 80% net
        owned, has been assembled;
    -   An inventory of over 725 drilling locations has been identified;
    -   Increased access to 3D seismic over Galleon lands by 80%;
    -   Commenced drilling on 2 new resource plays in the Peace River Arch
        with good initial success.

    2007 Financial Highlights

    -   Generated funds from operations of $131.1 million ($2.18 per basic
        share), an increase of 54% from 2006;
    -   Reached revenues of $245.2 million, an increase of 55% compared to
        2006;
    -   Recorded earnings of $17.6 million ($0.29 per basic share) excluding
        an unrealized loss of $9.3 million based on a mark to market value on
        crude oil costless collar contracts;
    -   Spent $208.3 million on exploration and development activities plus
        property acquisitions of $52.1 million;
    -   Completed two share equity offerings for gross proceeds of
        $90.0 million with the issuance of 4,814,100 Class A shares;
    -   Increased the extendible revolving bank credit facility to
        $220 million; and
    -   Approved a $200 million capital budget for 2008 to be funded from
        cash flow.

    Subsequent to year end 2007

    In 2008, commodity prices have continued to strengthen and opportunities
for consolidation acquisitions have increased. Galleon's focus is to create
value through both drilling and acquisitions. Galleon plans to pursue
acquisitions which have intrinsic value exceeding current market value and are
accretive on a cash flow and reserve basis.

    -   The acquisition of ExAlta Energy Inc. ("ExAlta") closed on
        January 16, 2008 which increased proved plus probable reserves by
        5.3 million BOE to 64.8 million BOE, in aggregate.
    -   The extendible revolving bank credit facility has been increased to
        $250 million with an additional $15 million acquisition facility.
    -   Galleon has entered into an agreement to purchase a non-listed
        company ("Privateco") for consideration of $67.2 million which
        includes positive working capital of approximately $3.8 million. The
        acquisition price will be paid by the issuance of approximately
        4 million Class A shares of Galleon. This is a consolidation
        acquisition with approximately 80% of the properties located in
        Galleon's Dawson Montney core area. The acquisition will add proved
        plus probable reserves of 4.2 million BOE and over 1,500 BOE/day of
        production (85% natural gas, 15% oil). In addition, 8 gas plants
        exceeding 42 Mmcf/d gross capacity and in excess of 65,000 net
        undeveloped acres of land will be acquired. The land and gas plants
        are estimated to be valued at $9.8 million. The acquisition will be
        completed by way of a plan of arrangement and is subject to receipt
        of approval by not less than 66 2/3% of the shareholders of Privateco
        that vote on the resolution, court approval and required regulatory
        approvals. The acquisition is expected to close prior to the end of
        May 2008.
    -   With the strength of natural gas and light oil pricing, Galleon has
        positioned itself to explore and exploit more Montney natural gas
        resource plays and light oil projects which can deliver significant
        long life reserves and production.
    -   Currently, one horizontal well in the Dawson Montney natural gas
        resource project is being drilled. The success of the horizontal well
        will affect positively the exploitation plan and increase potential
        reserves and production from the Dawson Montney gas project which
        contains over 500 sections of land.
    -   In the second half of 2008, one horizontal and one vertical well in
        the Montney resource play located in B.C. are planned. One horizontal
        well, targeting the Montney resource play, in the Calais area of
        Alberta is also planned in the second half of 2008.

    Reserves

    The reserves of the Corporation (not including ExAlta and Privateco) were
evaluated by Degolyer and MacNaughton Canada Limited ("DeGolyer") as at
December 31, 2007. The reserve evaluation has been approved by the Board of
Directors of Galleon.
    Gross reserves are the total of the Corporation's working interest share
before deduction of royalties owned by others. Net reserves are the total of
the Corporation's working interest reserves after deducting amounts
attributable to royalties owned by others, plus the Corporation's royalty
interest reserves.

    In 2007, capital and reserve additions are as follows:
                                                                 Proved plus
                                                          Proved    probable
                                             Capital     reserve     reserve
                                        expenditures   additions   additions
                                                 $MM       MMBoe       MMBoe
                                       --------------------------------------
    Exploration & development                  208.3         9.2        12.0
    Acquisitions                                52.0         1.5         2.0
    Change in future capital - proven           15.8           -           -
    Change in future capital - probable         42.3           -           -
    -------------------------------------------------------------------------
    Total                                      318.4        10.7        14.0
    -------------------------------------------------------------------------

    The aggregate of exploration and development costs incurred in the most
recent financial year and the change during that year in estimated future
development costs generally will not reflect total finding and development
costs related to reserves additions for that year.

    Forecast price case - Remaining Reserves as of December 31, 2007
    -------------------------------------------------------------------------
                             Light Oil         Heavy Oil         Sales Gas
                               (Mbbl)            (Mbbl)            (MMcf)
    -------------------------------------------------------------------------
                          Gross      Net    Gross      Net    Gross      Net
    -------------------------------------------------------------------------

    Proved Developed
     Producing            5,920    4,324    1,751    1,393   44,515   34,019
    Proved Developed
     Non-Producing        1,194      899      820      680   18,605   13,612
    Proved Undeveloped    3,454    2,597    4,130    3,368   34,119   26,714
    -------------------------------------------------------------------------
    Total Proved         10,567    7,820    6,700    5,441   97,239   74,345
    Probable             11,259    8,140    4,692    3,719   54,298   41,270
    -------------------------------------------------------------------------
    Total proved plus
     probable            21,826   15,960   11,392    9,160  151,537  115,615
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------
                           Natural Gas
                          Liquids (Mbbl)     Total (Mboe)
    -------------------------------------------------------
                          Gross      Net    Gross      Net
    -------------------------------------------------------
    Proved Developed
     Producing              275      186   15,365   11,573
    Proved Developed
     Non-Producing          139       90    5,253    3,937
    Proved Undeveloped      197      133   13,467   10,550
    -------------------------------------------------------
    Total Proved            611      408   34,085   26,060
    Probable                389      259   25,388   18,997
    -------------------------------------------------------
    Total proved plus
     probable             1,000      668   59,473   45,057
    -------------------------------------------------------
    -------------------------------------------------------

    Gross proved plus probable reserves at Puskwa, Dawson Montney gas,
Eaglesham and Edam combined represent approximately 77% of corporate reserves
volumes and 78% of corporate reserves value.

    -------------------------------------------------------------------------
    Forecast Price Case              Future Net Revenue Before Income Taxes
                                     as of December 31, 2007 ($MM)
    -------------------------------------------------------------------------
                                            Discounted
                                                   at:
    Reserve category                 Undisc         5%         8%        10%
    -------------------------------------------------------------------------
    Proved Developed Producing          481        417        388        371
    Proved Developed Non-Producing      135        105         93         86
    Proved Undeveloped                  291        200        164        145
    -------------------------------------------------------------------------
    Total Proved                        907        723        645        601
    Probable                            786        567        480        433
    -------------------------------------------------------------------------
    Total proved plus probable        1,692      1,289      1,125      1,035
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Note: Future net revenue does not represent fair market value

    DeGolyer used the following price assumptions in the forecast reserves
pricing and costs case as released by DeGolyer effective December 31, 2007.

                                      WTI Cushing     Edmonton       Alberta
    Pricing                              Oklahoma    Oil Price          Spot
    assumptions                        ($U.S./Bbl)  ($Cdn./Bbl)   ($Cdn./Mcf)
    -------------------------------------------------------------------------
    2008                                    90.00        89.50          6.69
    2009                                    86.52        86.01          7.29
    2010                                    84.87        84.34          7.18
    2011                                    83.32        82.78          7.13
    2012                                    82.78        82.23          7.19
    2013                                    82.19        81.62          7.21
    2014                                    81.53        80.96          7.35
    2015                                    81.99        81.41          7.49
    

    Additional reserve disclosure tables, required under NI 51-101, will be
contained in the Annual Information Form to be filed on SEDAR before March 29,
2008. Consistent with industry standard practice, reserves have been
calculated under the existing Alberta royalty regime due to uncertainties and
lack of sufficient details to determine royalties under the proposed Alberta
new royalty regime (NRF).

    Production and operations

    Production averaged 14,695 boepd during the fourth quarter of 2007. In
January and February 2008, the bitter cold weather has affected operations and
production in Galleon's major properties. This cold weather caused some
temporary shut-ins of existing production as well as delays in well
completions, well tie-ins and new oil well equipping. Also, delays were
experienced on the start-up of the newly constructed Eaglesham 10,000 bopd oil
battery. The Q1 2008 average production is estimated to be between 17,000 and
17,500 boepd. In March, these operational issues have been rectified. Current
production, based on field receipts, exceeds 19,000 boepd. In addition,
400 boepd of production in the Clear Hills area (acquired in the ExAlta
acquisition) remains shut in due to a third party gas plant incident. This gas
plant is expected to be back on stream in Q2 2008.
    Post completion of the current acquisition of Privateco, Galleon will
increase exit 2008 production guidance to over 23,000 boepd.

    Management's Discussion and Analysis

    This Management's Discussion & Analysis ("MD&A") is intended to assist in
the understanding of the trends and significant changes in the financial
condition and results of operations of Galleon Energy Inc. ("Galleon" or the
"Corporation") for the year ended December 31, 2007 with comparisons to the
year ended December 31, 2006. The MD&A has been prepared by management in
accordance with Canadian generally accepted accounting principles ("GAAP") and
should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 2007.
    Petroleum and natural gas reserves and volumes are converted to a common
unit of measure on a basis of six thousand cubic feet (Mcf) of gas to one
barrel (Bbl) of oil. Barrels of oil equivalent ("BOE") may be misleading,
particularly if used in isolation. The forgoing conversion ratio is based on
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.
    Amounts are shown in Canadian dollars unless otherwise stated. All
production volumes disclosed herein are sales volumes.
    This MD&A is based on information available as of, and is dated,
March 10, 2008.

    Non-GAAP Measurements

    The MD&A contains terms commonly used in the oil and gas industry, such
as funds from operations, funds from operations per share, and operating
netback. These terms are not defined by GAAP and should not be considered an
alternative to, or more meaningful than, cash provided by operating activities
or net earnings as determined in accordance with Canadian GAAP as an indicator
of Galleon's performance. Management believes that in addition to net
earnings, funds from operations is a useful financial measurement which
assists in demonstrating the Corporation's ability to fund capital
expenditures necessary for future growth or to repay debt. Galleon's
determination of funds from operations may not be comparable to that reported
by other companies. All references to funds from operations throughout this
report are based on cash flow from operating activities before changes in
non-cash working capital and abandonment expenditures. The Corporation
calculates funds from operations per share by dividing funds from operations
by the weighted average number of Class A shares outstanding.
    Galleon uses the term net debt in the MD&A and presents a table showing
how it has been determined. This measure does not have any standardized
meaning prescribed by Canadian GAAP and therefore may not be comparable to
similar measures presented by other companies.

    
    Annual Information

    ($000s)                                  2007         2006          2005
    -------------------------------------------------------------------------
    Revenues                              245,203      157,931       135,050
    Funds from Operations(1)              131,052       85,151        78,079
      Per share, basic(1)                    2.18         1.60          1.78
      Per share, diluted(1)                  2.12         1.52          1.68
    Net Earnings                            8,286       13,826        19,620
      Per share, basic                       0.14         0.26          0.45
      Per share, diluted                     0.13         0.25          0.42
    Total Assets                          799,359      614,565       352,619
    Net debt                              193,557      151,213        93,783
    Total Long-term Financial Liabilities       -            -             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Funds from operations and funds from operations per share is not a
        standard measure under GAAP and may not be comparable to similar
        measures presented by other companies. Management believes that funds
        flow per share is a useful supplementary measure that may assist
        investors in assessing the underlying per share value of the
        Corporation.
    (2) See " Non-GAAP Measurements"

    Results of Operations

    Comparative financial results for the year are as follows:

    Year ended December 31                 2007                  2006
    -------------------------------------------------------------------------
                                    4,901,518 BOE         3,420,198 BOE
    ($000s)                                      $/BOE                 $/BOE
    -------------------------------------------------------------------------
    Revenues                        245,203      50.03    157,931      46.18
    Royalties                       (51,586)    (10.52)   (32,900)     (9.62)
    ARTC and GCA                     10,033       2.05      9,371       2.74
    Transportation costs             (6,024)     (1.23)    (4,507)     (1.32)
    Operating costs                 (44,759)     (9.13)   (33,675)     (9.85)
    -------------------------------------------------------------------------
    Net                             152,867      31.20     96,220      28.13
    Other revenue                         -          -          5          -
    G&A                              (7,281)     (1.49)    (5,590)     (1.63)
    Interest costs                  (10,110)     (2.06)    (4,527)     (1.32)
    Loss on financial derivative     (3,545)     (0.72)         -          -
    Capital and other taxes            (879)     (0.18)      (957)     (0.28)
    -------------------------------------------------------------------------
    Funds from operations(1)        131,052      26.75     85,151      24.90
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) See "Non-GAAP Measurements"



    Petroleum and Natural Gas Revenues
    Year ended December 31                 2007                  2006
    -------------------------------------------------------------------------
    ($000s)                                          %                     %
    Light oil                        98,564         40     50,139         32
    Heavy oil                        27,776         11     25,131         16
    NGLs                              5,736          3      2,919          2
    Natural gas                     112,299         46     79,125         50
    Royalty income                      828          -        617          -
    -------------------------------------------------------------------------
    Total                           245,203        100    157,931        100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenues for the year ended December 31, 2007 increased 55% to
$245.2 million from $157.9 million in the prior year due to a 43% increase in
average production volumes. As well the overall price received increased to
$50.03/BOE from $46.18/BOE a year ago as a result of higher commodity prices.
The average oil price increased 15% year-over-year excluding the 2007 crude
oil financial derivative contract. Galleon's petroleum products are sold at
spot reference prices based on U.S. dollars for crude oil and AECO for natural
gas. The 2007 decline in the value of the U.S. dollar has had a negative
effect on the oil revenues received by Galleon.

    Production
    Year ended December 31                 2007                  2006
    -------------------------------------------------------------------------
                                      BOE/d          %      BOE/d          %
    Light oil (Bbls/d)                3,562         26      1,963         21
    Heavy oil (Bbls/d)                2,005         15      1,845         20
    NGLs (Bbls/d)                       246          2        131          1
    Natural gas (Mcf/d)              45,697         57     32,584         58
    -------------------------------------------------------------------------
    BOE/d (6:1)                      13,429        100      9,370        100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Average production volumes for 2007 of 13,429 BOE/d increased by 43%
compared to 9,370 BOE/d in 2006. By product, light oil volumes increased 81%,
natural gas volumes increased 40%, and heavy oil volumes increased 9%. Light
oil production increased as a result of drilling success in the Puskwa,
Eaglesham and newly discovered areas of McLeans Creek and Kimiwan. Natural gas
production increased as a result of Dawson Montney gas, Eaglesham and Puskwa
drilling success. Heavy oil production increased slightly as a result of
optimization techniques and minor workovers at Edam.

    Commodity Pricing and Marketing

    Petroleum products are sold to major Canadian marketers at spot reference
prices based on US WTI for crude oil and AECO for natural gas. As a means of
managing the risk of commodity price volatility, for the period from April 1,
2007 - October 31, 2007 15,000 GJ per day was contracted at prices ranging
between $6.50 per GJ to $8.12 per GJ. For the period December 31, 2007,
Galleon realized gains of $3,993,621 on its gas contracts. As well in 2007
Galleon realized a loss of $3,544,859 on crude oil financial derivative
contracts for 1,000 Bbl per day for the period from January 1, 2007 -
December 31, 2007 and 2,000 Bbl per day for the period from July 1, 2007 -
December 31, 2007.
    Galleon entered into one term natural gas contract and two crude oil
financial contracts for 2008. The natural gas contract for 10,000 GJ/day was
put in place on January 8, 2008 and has a term from February 1 to December 31,
2008 with pricing subject to a costless collar of $6.00/GJ and $8.00/GJ
Canadian. For crude oil, Galleon implemented one costless collar contract on
2,000 Bbl/day, fixing a floor price of WTI CDN $70.00/bbl and a ceiling of WTI
CDN $80.75/bbl for the period January 1, 2008 to December 31, 2008. A second
crude oil costless collar contract was also implemented on 1,000 bbl/day,
fixing a floor price of $75.00 WTI USD and a ceiling of $100.00 WTI USD for
the period January 1, 2008 to December 31, 2008. An unrealized loss of
$9,264,400 was recorded based on the mark to market value at December 31, 2007
of these 2008 financial contracts.

    
    Prices (net of transportation)

    Year ended December 31                                 2007         2006
    -------------------------------------------------------------------------
    Light oil ($/Bbl)                                     74.77        68.81
    Heavy oil ($/Bbl)                                     37.39        36.75
    Total oil including financial derivative
     contract ($/Bbl)                                     59.56        53.27
    Total oil with out financial derivative
     contract ($/Bbl)                                     61.31        53.27
    Natural gas ($/Mcf)                                    6.54         6.44
    NGLs ($/Bbl)                                          63.94        60.84
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The average light oil price (excluding the financial derivative contract)
received for 2007 was $74.77/Bbl, an increase of 9% compared to $68.81/Bbl in
the prior year. The average heavy oil price was $37.39/Bbl, an increase of 2%
compared to $36.75/Bbl in the prior year. For 2008, management has budgeted an
average WTI price of USD $75.00.
    The average natural gas price received for 2007 was $6.54/Mcf, an increase
of 2% compared to $6.44/Mcf in the prior year. For 2008, management has
budgeted an average AECO price of $6.25/Mcf.

    Performance by Property

    Years ended
    December 31               2007                    2006
    ---------------------------------------  ----------------------
                                     Oper-                   Oper-      2007
                                     ating                   ating     Funds
                                      net-                    net-      from
                                     backs/                  backs/   opera-
                       Production    BOE(1)    Production    BOE(1)  tions(2)
    -------------------------------------------------------------------------

                       BOE/d     %       $     BOE/d     %       $         %
    Puskwa             2,125    16   52.31       657     7   55.55        28
    Dawson Montney
     gas               3,406    25   28.50     1,120    12   23.18        25
    Eaglesham          1,763    13   28.91       280     3   35.42        13
    Dawson             3,025    23   29.60     4,010    43   28.62        23
    Calais               715     5   25.03     1,002    11   26.62         5
    Edam and other
     heavy oil         2,005    15    8.33     1,846    20    7.57         4
    B.C.                 212     2   27.18       225     2   26.01         1
    Other                178     1   12.53       230     2   18.73         1
    -------------------------------------------------------------------------
                      13,429   100   29.14     9,370   100   25.39       100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Operating netbacks/BOE exclude ARTC and GCA and are calculated by
        subtracting royalties and operating costs from revenues divided by
        average annual production.
    (2) See "Non-GAAP Measurements".
    

    Galleon continued to expand the Puskwa Beaverhill Lake ("BHL") light oil
project in 2007 and has drilled 12 wells with 100% success thereby expanding
the pool boundaries to approximatey ten miles in length. Throughout most of
2007, this pool has been produced under primary recovery. Galleon believes,
based on analogous BHL pools, that the reservoir lends itself to enhanced oil
recovery which can significantly increase the recoverable oil from the pool.
Two enhanced recovery schemes have been initiated and have performed well to
date. Puskwa contributed 28% of annual funds from operations from 16% of total
production. Producing wells generated strong operating netbacks of $52.31/BOE
driven by low operating costs of $4.54/BOE and high light oil prices, net of
transportation, of $77.31/bbl. The high light oil price received is indicative
of the quality of the 38 degree API sweet oil. Galleon plans to drill up to 13
new wells in the Puskwa area in 2008 and expand the enhanced recovery scheme
areas. Based on Galleon's past experience exploiting BHL pools, 40 acre
spacing is necessary for optimum drainage of the reservoir. As the current
well spacing is 160 acres, there is significant potential for additional
infill drilling in this project and applications for downspacing have been
initiated. A significant Montney resource play has been identified in this
area and will be delineated in 2008.
    In 2007 Galleon expanded the Dawson Montney gas fairway by 10 miles to
encompass an area approximately 35 miles long by 12 miles wide. Galleon has
achieved a drilling success rate of over 90% and has identified in excess of
350 locations in this project. Production of Montney gas at Dawson increased
by 204% compared to 2006 due to a successful drilling program. Operating
netbacks increased by 23% to $28.50/BOE due primarily to lower operating costs
of $4.88/BOE compared to $6.04/BOE in 2006. Operating costs per BOE are low
due to control of the facilities in the area and increased production rates.
Dawson Montney Gas average production was 3406 BOE/day and contributes 25% of
the annual funds from operations from 25% of production. Galleon has assembled
a large contiguous land block at Dawson covering over 500 square miles. The
future plan for this project is to continue to explore for new Montney pools
located along trend and to further develop the existing projects which
includes down spacing to 2 wells per section. Galleon plans to drill up to 34
wells on this play and to expand the natural gas facilities to capacity of
40 mmscfd in 2008, subject to natural gas prices.
    Liquids rich natural gas and light oil production at Eaglesham averaged
1,763 BOE/day in 2007. Galleon has drilled 15 wells in 2007 with 87% success
and has identified new light oil pools in Eaglesham. Eaglesham contributed 13%
of 2007 annual funds from operations from 13% of production. Year to date
operating netbacks of $28.91/BOE reflect a low operating cost structure of
$5.82/BOE. Control of the facilities in the area has enabled Galleon to
control operating costs. A new 10,000 BOE/day oil battery with significant
water disposal capabilities and expansion of the existing gas plant were
completed in early 2008. The battery and plant expansion was required to
accommodate existing and significant production growth expected in 2008.
Galleon spent $3.0 million on 3D seismic in the Eaglesham area in 2007 and
based on this seismic has built a prospect inventory of over 50 locations.
Galleon plans to drill up to 17 wells in this area in 2008 expanding the
Wabamun oil play on the existing Galleon acreage trend.
    The Dawson area averaged 3025 BOE/day and contributes 23% to Galleon's
annual funds from operations from 23% of total production. Production from the
area decreased overall by 25% compared to the previous year as a result of
natural gas declines due to reduced capital spending. Light oil production
increased 26% in the Dawson area in fourth quarter 2007 compared to the prior
year 2006, mainly due to new light oil discoveries at McLeans Creek. Galleon
drilled 5 wells in McLeans Creek with an 80% success rate. The majority of
this production came on in December 2007 and averaged 745 BOE/day in the month
of December. Galleon plans to drill up to 8 wells in the first quarter of 2008
at McLeans Creek.
    The heavy oil wells primarily at Edam contributed 4% of annual funds from
operations from 15% of total production. Operating netbacks of $8.33/BOE
increased 10% compared to the prior year mainly due to a 9% increase in
production compared to 2006.

    
    Royalties

    Year ended December 31                                 2007         2006
    -------------------------------------------------------------------------
    ($000s)
    Crown                                                47,524       29,985
    Freehold                                              1,149        1,134
    GORR and other                                        2,913        1,781
    -------------------------------------------------------------------------
    Subtotal                                             51,586       32,900
    ARTC and GCA                                        (10,033)      (9,371)
    -------------------------------------------------------------------------
    Net royalties                                        41,553       23,529
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    % of revenue                                           21.0         20.8
    % of revenue net of ARTC and GCA                       16.9         14.9
    

    Gross royalties were 21.0% of revenues for 2007 compared to 20.8 % in
2006. By product, gross royalties were 18.8% for light oil, 23.79% for natural
gas, 20.6% for heavy oil, and 26.48% for liquids. For 2006 by product, gross
royalties were 13.1% for light oil, 26.1% for natural gas, 19.4% for heavy
oil, and 32.7% for liquids. Average royalties in 2007 increased as a result of
price increases per BOE as well as a reduction in royalty holidays mainly in
the Puskwa area compared to 2006. In 2006 the average royalty rate in Puskwa
was 11.73% and in 2007 21.18%. Net royalties of 16.9% increased due to a 57%
increase in net royalties which was partially offset by a 7% increase in Gas
Cost Allowance.
    GORR royalties for 2007 increased by 64% compared to the prior year
mainly due to encumbrances from the expansion of our Dawson Montney Gas and
Eaglesham areas.
    In 2006 Galleon received $500,000 of Alberta Royalty Tax credits (ARTC).
For 2007 the ARTC program was discontinued.

    
    Operating Costs

    Year ended December 31                        2007
    -------------------------------------------------------------------------
                                       Production    Operating     Operating
                                                         costs         costs
                                                %            %         $/BOE
    Puskwa                                     16            8          4.54
    Dawson Montney gas                         25           14          4.88
    Eaglesham                                  13            9          5.82
    Dawson                                     23           27         10.90
    Calais                                      5            4          6.60
    Edam and other heavy oil                   15           32         21.23
    B.C.                                        2            3         10.50
    Other                                       1            3         20.31
    -------------------------------------------------------------------------
                                              100          100          9.13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Year ended December 31                        2006
    -------------------------------------------------------------------------
                                       Production    Operating     Operating
                                                         costs         costs
                                                %            %         $/BOE
    -------------------------------------------------------------------------
    Puskwa                                      7            2          2.91
    Dawson Montney gas                         12            7          6.04
    Eaglesham                                   3            2         (1.58)
    Dawson                                     43           34          7.88
    Calais                                     11            7          6.02
    Edam and other heavy oil                   20           42         21.93
    B.C.                                        2            3          8.77
    Other                                       2            3         17.04
    -------------------------------------------------------------------------
                                              100          100          9.85
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating costs were $44.8 million or $9.13/BOE for the year ended
December 31, 2007 compared to $33.7 million or $9.85/BOE for the prior year.
Galleon's operating costs per barrel of oil equivalent excluding the heavy oil
were $7.01/BOE for the year and $6.88/BOE in 2006. Costs for the heavy oil
assets decreased from $21.93/BOE in 2006 to $21.23/BOE in 2007 mainly due to
increased production levels. Operating costs in Galleon's key areas of Puskwa,
Dawson Montney gas, and Eaglesham remain low and below the corporate average
for 2007 due to control of the facilities in those areas.
    Operating costs for Puskwa increased to $4.54/BOE in 2007 compared to
$2.91/BOE in 2006, mainly due to the waterflood project. This project resulted
in an increase in water trucking costs of $0.30/BOE and pump rental costs of
$0.55/BOE for water injection. Other cost increases for Puskwa were minor
workover and well service costs of $0.70/BOE due to a greater percentage of
pumping oil wells in 2007 compared to flowing wells in 2006. In 2008,
operating costs are expected to decrease with the completion of permanent
waterflood facilities. As well operating costs related to minor workovers and
well servicing are expected to increase due to a larger number of pumping oil
wells compared to the flowing oil wells in 2007.
    Operating costs decreased to $4.88/BOE for Dawson Montney Gas compared to
$6.04/BOE in 2006, due to control of the facilities in this area, increased
production levels and increased processing revenues. In 2007, processing
revenues from the facilities were $0.77/BOE compared to $0.49/BOE in 2006 and
production of 3,406 BOE/day increased 204% compared to 1,120 BOE/day in 2006.
    Eaglesham operating costs for 2007 were $5.82/BOE compared to ($1.58)/BOE
in 2006. For 2006, processing revenues from the facilities were $7.15/BOE,
while gross operating costs were $5.57/BOE. Net operating costs therefore
resulted in a credit of $1.58/BOE. Processing revenues in 2007 were $1.30/BOE
and gross operating costs were $7.12/BOE. Operating costs for 2007 included
trucking costs of $1.88/BOE and $1.29/BOE of third party processing and water
disposal costs which will be eliminated in 2008 with the start up our
Eaglesham oil battery.
    Operating costs for the properties at Dawson of $10.90/BOE increased
compared to $7.88/BOE in 2006, due to natural volume declines. Galleon's new
discovery at McLeans Creek is a high netback oil producing property included
in the Dawson area, but most of the production additions for 2007 were in the
month of December 2007 and therefore did not contribute much to the operating
cost per BOE for 2007.
    The Eaglesham oil battery addition in the first quarter 2008, the
anticipated expansion of natural gas facilities in the Dawson Montney gas to
the capacity of 40 mmscfd and other planned minor expansions to existing
capacity at Galleon's facilities will sufficiently accommodate planned
production increases. It is therefore anticipated that production additions in
the key areas will be brought on stream at rates similar to or better than
those experienced in 2007. It is anticipated that production increases in
Galleon's key areas will lower the corporate average operating costs per
barrel of oil equivalent.

    
    General and Administration Expenses

    Year ended December 31                 2007                  2006
    -------------------------------------------------------------------------
    ($000s)
                                                $/BOE                 $/BOE
    Gross                            12,155       2.48      9,926       2.90
    Capitalized overhead             (3,775)     (0.77)    (3,592)     (1.05)
    Overhead recoveries              (1,099)     (0.22)      (744)     (0.22)
    -------------------------------------------------------------------------
                                      7,281       1.49      5,590       1.63
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net general and administrative (G&A) expenses of $1.49/BOE for 2007 were
lower than the previous year as a result of increases in capital and operating
overhead recoveries due to increases in capital spending and operating
activity. Recoveries credited to operations were $1,098,913 and to capital
were $3,775,829 in 2007 compared to $744,309 and $3,592,255 respectively in
2006. An amount of $1,035,950 was capitalized in 2007 (2006 - $660,500) for
exploration salaries. Galleon's strategy of growth through asset acquisitions
and drilling has enabled it to add production without significant increases to
administrative costs. While gross G&A expenses have increased 22% with the
growth of the Corporation, gross G&A expenses per barrel of oil equivalent
have decreased by 14%. This is indicative of the efficiencies gained through
production growth.
    For the year ended December 31, 2007 G&A expenses by category were:
salary and employee - 54%, office - 17%, audit, engineering and legal - 8%,
consulting - 7%, computers - 6%, corporate - 6% and shareholder expense - 2%.
In 2006 G&A expenses by category were: salary and employee - 51%, office -
15%, corporate - 10%, audit, engineering and legal - 9%, consulting - 10%,
computers - 5%.
    The Corporation will be relocating office space in April 2008 to
accommodate current and planned growth resulting in an increase in G&A
expenses in 2008.

    Interest

    Interest expense of $10.1 million for the year ended December 31, 2007
was higher compared to $4.5 million in the prior year due to increased average
debt levels. The effective interest rate was 6.16% (2006 -5.38%). As at
December 31, 2007 Galleon's debt to equity ratio of 0.33 provides flexibility
to finance future capital programs, but has increased from 0.32 in the prior
year. Galleon monitors its debt levels in relation to equity, and as a ratio
of expected annual funds from operating activities. For 2008 interest costs
are expected to increase due to higher average debt levels.

    Stock Based Compensation

    Stock based compensation was a non-cash expense of $8.5 million for the
year compared to $7.7 million in the prior year. The increase was due to
grants of options to new employees and an increase in the fair value of new
options granted. As calculated by the Black-Scholes Option Pricing Model, all
other factors being equal, an increase in Galleon's share price results in a
higher option fair value. During the year 1,720,000 stock options were granted
at an average exercise price of $15.51 and had fair values of between $4.14
and $5.62 per option.
    At December 31, 2007 6,210,950 stock options were outstanding at an
average exercise price of $12.36.

    Depletion, Depreciation and Accretion

    Depletion and depreciation ("D&D") charges were $100.3 million or
$20.47/BOE for the year ended December 31, 2007 compared to $60.9 million or
$17.81/BOE in the prior year.
    Reserve additions for 2007 were estimated by an independent third party
qualified reserves evaluator. Capital expenditures of $105.8 million
($76.5 million - December 31, 2006) related to undeveloped land, seismic, and
equipment under construction have been excluded from the depletion and
depreciation calculation and $110.8 million ($95.0 million - December 31,
2006) of future development costs have been added.
    Accretion expense on the Corporation's asset retirement obligation was
$1,948,696 for the year compared to $631,000 in the prior year. The increase
related to a greater asset retirement obligation which is driven by the number
of wells and facilities in which Galleon has an interest.

    Capital and Future Taxes

    The current tax provision of $879,358 for the year was comprised of
Saskatchewan capital and resource taxes. The provision for future income taxes
was $2.7 million for the year ended December 31, 2007 compared to $2.2 million
for the prior year. The decrease in future taxes was a result of a decrease in
both the federal and provincial income tax rates during the year and lower net
earnings.
    Galleon has estimated tax pools of $544.6 million as at December 31,
2007.

    
    Capital Expenditures

    ($000s)
    -------------------------------------------------------------------------
    Property & equipment balance at December 31, 2006                577,758
    Additions to equipment inventory                                     293
    Additions to property and equipment                              208,344
    Acquisition of property and equipment                             52,082
    Asset retirement obligation                                        4,326
    Depletion and depreciation                                      (100,331)
    -------------------------------------------------------------------------
    Property & equipment balance at December 31, 2007                742,472
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Year ended December 31                 2007                  2006
    -------------------------------------------------------------------------
    ($000s)                                          %                     %
    Land                             10,789          5     31,385         11
    Geological and geophysical       16,808          8     22,947          8
    Drilling and completion         140,015         67    136,740         48
    Plant and facilities             40,378         20     92,144         33
    Other assets                        354          -        132          -
    -------------------------------------------------------------------------
    Exploration and Development
     Expenditures                   208,344        100    283,348        100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Capital expenditures during 2007 included $52.0 million for the
acquisition of oil and gas properties in the Dawson, Kakut, Shadow areas, and
$208.3 million on exploration and development expenditures. In 2007 Galleon
completed its most successful drilling program, 93 wells were drilled and
83 wells (74.8 net) were cased for an 89% success rate. By key area, 15 wells
were drilled at Eaglesham, 12 wells were drilled at Puskwa, and 32 wells were
drilled for Montney gas.
    Land and seismic expenditures in 2007 were concentrated in the above
three key areas. Management has established a capital budget of between $200
to $210 million for 2008 and plans to finance the program with funds from
operating activities.

    
    Liquidity and Capital Resources

    Year ended December 31                                 2007         2006
    -------------------------------------------------------------------------
    ($000s)
    -------------------------------------------------------------------------

    Bank debt                                           163,378      122,996
    Working capital deficiency                           30,179       28,217
                                                        193,557      151,213
    -------------------------------------------------------------------------
    Funding of Capital Program

    Year ended December 31                                 2007         2006
    -------------------------------------------------------------------------
    ($000s)

    Issuance of shares, net of costs                     88,332      168,208
    Funds from operations                               131,052       85,151
    Change in bank debt                                  40,382       47,694
    Change in working capital and other                    (210)       9,120
    -------------------------------------------------------------------------
                                                        259,556      310,173
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the year, net proceeds of $88.3 million from equity offerings,
funds from operations of $131.1 million, and an additional $40.2 million in
bank debt and working capital were used to fund $259.6 million of acquisition
and exploration and development expenditures.
    At December 31, 2007, the Corporation has extendible revolving term
credit facilities of $220 million in place with a bank syndicate. The
facilities bear interest at rates ranging from the bank's prime rate to prime
plus 0.75% per annum on $210 million and at rates ranging from the bank's
prime rate plus 0.95% to prime plus 1.75% on $10 million based on the
Corporation's debt to cash flow ratio. The Corporation may also borrow at the
prevailing Banker's Acceptance rate. Collateral for the facilities consists of
a demand debenture for $500 million collateralized by a first floating charge
over all of the property and equipment of the Corporation. At December 31,
2007, an amount of $163.3 million was drawn against the credit facilities
(December 31, 2006 - $123.0 million).
    Subsequent to December 31, 2007 upon closing the acquisition of ExAlta
Energy Inc., Galleon's extendible revolving term credit facility was increased
to $265 million comprised of a lending facility of $250 million and an
acquisition facility of $15 million.

    
    Summary of Quarterly Results

    Quarterly Highlights                            2007
    -------------------------------------------------------------------------
                                      Q4          Q3          Q2          Q1
    Financial ($000s)
    Revenues                      71,339      60,156      60,734      52,974
    Operating costs              (14,227)    (10,547)    (10,507)     (9,478)
    General & Administrative
     expenses                     (2,712)     (1,507)     (1,797)     (1,265)
    Interest expense              (2,476)     (2,707)     (2,681)     (2,246)
    Funds from operations(2)      35,483      32,566      32,834      30,169
      Per share, basic(1,2)         0.56        0.54        0.55        0.52
      Per share, diluted(1,2)       0.55        0.53        0.54        0.50
    Earnings (loss)                 (495)      1,590       3,270       3,921
      Per share, basic(1)          (0.01)       0.03        0.06        0.07
      Per share, diluted(1)        (0.01)       0.03        0.05        0.07
    Total assets                 799,359     743,932     699,112     692,749
    Weighted average
     outstanding Class
     A shares-basic(1)        63,206,585  59,880,135  59,204,393  57,800,899
    Weighted average
     outstanding Class A
     shares-diluted(1)        64,716,872  61,724,550  61,175,217  59,947,494
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Quarterly Highlights                            2006
    -------------------------------------------------------------------------
                                      Q4          Q3          Q2          Q1
    Financial ($000s)
    Revenues                      45,264      39,921      36,517      36,230
    Operating costs               (9,651)     (9,243)     (7,716)     (7,065)
    G&A                           (2,670)       (692)     (1,068)     (1,160)
    Interest                      (1,487)     (1,202)     (1,098)       (740)
    Funds from operations(2)      23,857      21,178      22,069      18,047
      Per share, basic(1,2)         0.42        0.39        0.42        0.36
      Per share, diluted(1,2)       0.40        0.37        0.40        0.35
    Earnings                       1,906       2,196       7,985       1,740
      Per share, basic(1)           0.03        0.04        0.15        0.04
      Per share, diluted(1)         0.03        0.04        0.15        0.03
    Total assets                 614,565     540,980     477,967     399,269
    Weighted average
     outstanding Class A
     shares-basic(1)          56,761,415  54,854,334  52,003,462  49,661,598
    Weighted average
     outstanding Class A
     shares-diluted(1)        59,234,229  57,447,555  54,838,259  52,220,178
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Restated to reflect a three-for-two Class A share split in June 2006.
    (2) See "Non-GAAP Measurements".



    Quarterly Highlights                            2007
    -------------------------------------------------------------------------
                                      Q4          Q3          Q2          Q1
    Production
    Light oil (Bbl/d)              4,419       3,375       3,317       3,127
    Heavy oil (Bbl/d)              1,746       1,949       2,247       2,081
    Natural Gas (Mcf/d)           49,486      48,989      45,314      38,845
    Liquids (Bbl/d)                  283         237         256         206
    BOE/d                         14,695      13,726      13,372      11,888
    Total BOE produced         1,351,986   1,262,762   1,216,855   1,069,915
    Daily BOE of production
     per million Class A
     shares - basic(1)               232         229         226         206

    Prices (net of
     transportation)
    Light oil ($/Bbl)              83.38       78.43       70.12       63.24
    Heavy oil ($/Bbl)              37.32       40.04       35.89       36.55
    Crude oil ($/Bbl)              64.40       63.25       56.30       52.57
    Natural Gas  ($/Mcf)            6.16        5.73        7.14        7.36
    NGLs ($/Bbl)                   72.90       64.05       59.67       56.64

    Per BOE ($)
    Revenues                       52.77       47.64       49.91       49.51
    Royalties, net
     of ARTC & GCA                 (8.55)      (8.41)      (9.04)      (7.84)
    Transportation costs           (1.18)      (1.13)      (1.16)      (1.47)
    Operating costs               (10.52)      (8.35)      (8.63)      (8.86)
    Net                            32.52       29.75       31.08       31.34
    Other revenue                      -           -           -           -
    G&A                            (2.00)      (1.19)      (1.48)      (1.18)
    Interest                       (1.83)      (2.14)      (2.20)      (2.10)
    Capital and other taxes         0.05       (0.18)      (0.41)      (0.21)
    Realized gain (loss) on
     financial derivative          (2.49)      (0.44)          -        0.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Quarterly Highlights                            2006
    -------------------------------------------------------------------------
                                      Q4          Q3          Q2          Q1
    Production
    Light oil (Bbl/d)              2,419       1,823       1,753       1,859
    Heavy oil (Bbl/d)              2,100       1,984       1,705       1,580
    Natural Gas (Mcf/d)           36,733      33,068      30,014      30,445
    Liquids (Bbl/d)                  230         102         100          93
    BOE/d                         10,869       9,420       8,560       8,606
    Total BOE produced           999,982     866,646     778,992     774,578
    Daily BOE of production
     per million Class A
     shares - basic(1)               191         172         165         173

    Prices (net of
     transportation)
    Light oil ($/Bbl)              63.03       75.65       75.63       65.66
    Heavy oil ($/Bbl)              31.16       47.01       42.69       24.71
    Crude oil ($/Bbl)              47.19       53.35       59.39       46.78
    Natural Gas  ($/Mcf)            6.84        5.58        5.97        7.36
    NGLs ($/Bbl)                   56.02       69.83       65.71       57.62

    Per BOE ($)
    Revenues                       45.26       46.06       46.88       46.77
    Royalties, net
     of ARTC & GCA                 (6.02)      (7.20)      (4.34)     (10.18)
    Transportation costs           (1.37)      (1.25)      (1.22)      (1.43)
    Operating costs                (9.65)     (10.66)      (9.91)      (9.12)
    Net                            28.22       26.95       31.41       26.04
    Other revenue                      -           -           -           -
    G&A                            (2.67)      (0.80)      (1.37)      (1.50)
    Interest                       (1.49)      (1.39)      (1.41)      (0.95)
    Capital and other taxes        (0.21)      (0.33)      (0.30)      (0.29)
    Realized gain (loss) on
     financial derivative              -           -           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    GALLEON ENERGY INC.
    Consolidated Balance Sheets
    As at December 31

    ($000s)                                                2007         2006

    -------------------------------------------------------------------------
    ASSETS
    CURRENT
      Accounts receivable                                35,406       24,639
      Deposits and prepaid expenses                       5,459        1,839
      Fair value of financial derivative                      -          190
    -------------------------------------------------------------------------
                                                         40,865       26,668

    Goodwill                                             16,022       10,139
    Equipment Inventory                                   2,829        2,536
    Property and equipment                              739,643      575,222
    -------------------------------------------------------------------------
                                                        799,359      614,565
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    CURRENT
      Accounts payable and accrued liabilities           71,044       54,695
      Bank loan                                         163,378      122,996
      Fair value of financial derivatives                 9,075            -
    -------------------------------------------------------------------------
                                                        243,497      177,691

    Asset retirement obligation                          25,535       21,432
    Future income taxes                                  52,299       32,287
    -------------------------------------------------------------------------
                                                        321,331      231,410
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
    Share capital                                       419,011      339,869
    Contributed surplus                                  19,064       11,619
    Retained earnings                                    39,953       31,667
    -------------------------------------------------------------------------
                                                        478,028      383,155
    -------------------------------------------------------------------------
                                                        799,359      614,565
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    GALLEON ENERGY INC
    Consolidated Statements of Earnings, Comprehensive Income and
    Retained Earnings
    Years ended December 31
    ($000s, except per share amounts)                      2007         2006

    -------------------------------------------------------------------------

    REVENUE
      Petroleum and natural gas revenue                 245,203      157,931
      Royalties, net of ARTC and GCA                    (41,553)     (23,529)
      Other income                                            -            5
    -------------------------------------------------------------------------
                                                        203,650      134,407

    EXPENSES
      Operating                                          44,759       33,675
      Transportation                                      6,024        4,507
      General and administration                          7,281        5,590
      Interest                                           10,110        4,527
      Stock-based compensation                            8,516        7,713
      Accretion                                           1,949          631
      Depletion and depreciation                        100,331       60,929
      Realized loss on financial derivatives              3,545            -
      Unrealized loss(gain) on financial derivatives      9,264         (190)
    -------------------------------------------------------------------------
                                                        191,779      117,382

    Earnings before taxes                                11,871       17,025
    Income taxes
      Capital and other taxes                               879          957
      Future income taxes                                 2,706        2,242
    -------------------------------------------------------------------------
                                                          3,585        3,199

    NET EARNINGS AND COMPREHENSIVE INCOME                 8,286       13,826
    -------------------------------------------------------------------------

    RETAINED EARNINGS, BEGINNING OF YEAR                 31,667       17,841
    -------------------------------------------------------------------------
    RETAINED EARNINGS, END OF YEAR                       39,953       31,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET EARNINGS AND COMPREHENSIVE INCOME PER SHARE
      Basic                                               $0.14        $0.26
      Diluted                                             $0.13        $0.25

    Weighted average Class A shares - basic          60,037,422   53,343,857

                                    - diluted        61,827,278   55,907,653
    -------------------------------------------------------------------------



    GALLEON ENERGY INC.
    Consolidated Statements of Cash Flows
    Years ended December 31
    ($000s)                                                2007         2006

    -------------------------------------------------------------------------
    Cash provided by (used in):
    OPERATING ACTIVITIES
      Net earnings                                        8,286       13,826
      Items not requiring cash:
        Future income taxes                               2,706        2,242
        Depletion and depreciation                      100,331       60,929
        Accretion                                         1,949          631
        Stock-based compensation                          8,516        7,713
        Unrealized loss (gain) on financial derivative    9,264         (190)
      Abandonment costs                                  (2,172)        (614)
      Change in non-cash working capital                 (5,812)         (39)
    -------------------------------------------------------------------------

                                                        123,068       84,498
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
      Issue of common shares                             93,257      178,300
      Share issue costs                                  (4,925)     (10,092)
      Bank loan                                          40,382       47,694
    -------------------------------------------------------------------------
                                                        128,714      215,902
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
      Additions to equipment inventory                     (293)      (1,429)
      Additions to oil and gas properties              (208,344)    (283,348)
      Acquisition of oil and gas properties             (50,919)     (25,396)
      Change in non-cash working capital                  7,774        9,773
                                                       (251,782)    (300,400)
    -------------------------------------------------------------------------
    CHANGE IN CASH                                            -            -
    CASH, BEGINNING OF YEAR                                   -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CASH, END OF YEAR                                         -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTARY INFORMATION
      Cash interest paid                                 10,084        5,040
      Cash taxes paid                                       542        1,208
    -------------------------------------------------------------------------
    

    Galleon is a technically oriented high growth oil and gas company with
focused operations in the Peace River area of Alberta. Galleon has access to
over 1 million gross acres of land.
    Galleon has approximately 67.8 million Class A shares and 922,500 Class B
shares issued and outstanding which trade on the TSX under the symbols "GO.A"
and "GO.B".

    ADVISORY: Certain information regarding Galleon Energy Inc. in this news
release including management's assessment of future plans and operations, the
planned acquisition of Privateco, the timing of the acquisition and the
effects thereof, number, type and timing of wells to be drilled, the plan and
development of certain prospects, production estimates, and expected
production growth may constitute forward-looking statements under applicable
securities laws and necessarily involve risks including, without limitation,
risks related to the planned acquisition of Privateco including regulatory and
shareholder approvals, risks associated with oil and gas exploration,
development, exploitation, production, marketing and transportation, loss of
markets, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risks, competition from other producers,
inability to retain drilling rigs and other services, capital expenditure
costs, including drilling, completion and facilities costs, unexpected decline
rates in wells, wells not performing as expected, incorrect assessment of the
value of acquisitions, failure to realize the anticipated benefits of
acquisitions, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources. As a consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive. Additional information on these
and other factors that could effect Galleon's operations and financial results
are included in reports on file with Canadian securities regulatory
authorities and may be accessed through the SEDAR website (www.sedar.com), at
Galleon's website (www.galleonenergy.com). Furthermore, the forward-looking
statements contained in this news release are made as at the date of this news
release and Galleon does not undertake any obligation to update publicly or to
revise any of the included forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be required by
applicable securities laws.

    Disclosure provided herein in respect of barrels of oil equivalent (boe)
may be misleading, particularly if used in isolation. A boe conversion ratio
of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead.





For further information:

For further information: SEE www.galleonenergy.com OR CONTACT: Steve
Sugianto, President and Chief Executive Officer, (403) 261-9287,
steves@galleonenergy.com; Glenn R. Carley, Executive Chairman, (403) 261-9277,
glennc@galleonenergy.com; Shivon Crabtree, Vice President and Chief Financial
Officer, (403) 261-9276

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