Galleon Energy - Success with Montney horizontal wells and light oil drilling provides a strong start to post breakup activity



    CALGARY, July 23 /CNW/ - Galleon Energy Inc. ("Galleon") announces
continued drilling and operational successes.

    
    Drilling highlights:

    -   In June, 2008, Galleon drilled and cased 9 gross wells resulting in
        7 (7.0 net) natural gas wells and 2 (2.0 net) light oil wells for a
        success rate of 100%;
    -   In July, 2008 to date, Galleon has drilled and cased 10 gross wells
        resulting in 7 (6.2 net) natural gas wells and 3 (2.5 net) light oil
        wells for a success rate of 100%;
    -   Included in the foregoing, Galleon has drilled and cased 6 Montney
        horizontal gross wells and 6 Montney vertical gross wells since early
        June 2008:
    -   Seven rigs are currently drilling including two Montney horizontal
        targets.
    

    In 2008, Galleon intends to pursue production and reserves growth with
drilling projects targeting Montney resource gas and light oil. Two to three
rigs are planned to be constantly active on Montney projects during Q3 2008.
All Montney horizontals are expected to be completed with multistage
fractures. Galleon's 2008 program targets projects that can provide
repeatability, predictability and size.

    Eastern Montney Project

    Galleon has initiated an aggressive Montney horizontal drilling program
at Dawson, Alberta ("Eastern Montney"). To date, five Montney horizontal wells
(100% interest) have been drilled and completed with multistage fractures.
    In June 2008, three horizontal wells were drilled confirming the size of
the fairway which extends over a distance of 25 km. The 3 wells tested
approximately 600 Boe/d, in aggregate, of natural gas and NGLs over a period
of 48 hours. The natural gas wells are liquids rich with NGL production tests
of between 40 and 60 Bbls per Mmcf. The on stream production rate for each of
these wells has yet to be determined.
    This successful Q2 drilling program is incremental to the strong results
from the 6-21-77-21W5 horizontal well which was drilled in Q1 2008. The 6-21
well is currently producing 2.0 Mmcf/d with 80 Bbls/d of NGLs.
    In July 2008, the fifth horizontal well in the Eastern Montney program
was drilled and tested at a rate of approximately 2.9 Mmcf/d with NGLs of
100 Bbl/d over a test period of 72 hours. The on stream production rate for
this well has yet to be determined.
    Due to the success of the Eastern Montney horizontal program, Galleon
plans to expand the number of horizontal wells to be drilled in this fairway
in 2008 from 10 to up to 24 gross wells. Galleon has access to approximately
313,000 gross acres of land in the Eastern Montney region.
    The horizontal Montney economics are robust in comparison to vertical
wells both on a rate of return and reserve optimization basis. The horizontal
wells currently cost approximately $1.3 million each on average to drill,
complete and tie-in compared to approximately $0.8 million on average for each
of the vertical wells. At current commodity prices and costs and historical
production rates, pay out of these wells is estimated to be less than one
year. Galleon believes horizontal drilling will be adopted as the optimal
development method for the Eastern Montney pool project. Over 100 horizontal
trajectories have been laid out in the core of the pool under current spacing
regulations. With continued success there is potential for an additional 200
horizontal wells within the current mapped boundaries of the pool.
    In Q3 2008, Galleon also will be pursuing Montney exploration drilling
within the Eastern Montney region. At least 1 horizontal well and 2 vertical
wells will be drilled on trends in the area.

    Central Montney Project

    Galleon is committed to growing its Montney presence in the Central
Montney region and in 2008 at least 5 new Montney resource plays will be
tested.
    Three Montney vertical wells (100% interest) were successfully drilled on
new Montney fairways in June 2008. One well has been completed and two wells
are waiting on a service rig. Test results on the completed well showed a
stabilized rate of 0.9 Mmcf/d at a 35% draw down over a testing period of
48 hours. The production rate has yet to be determined.
    In July 2008, two Central Montney horizontal wells (100% interest) were
drilled and cased for production. Both wells showed Montney gas on mud logs
throughout the horizontal leg. One of these horizontal wells has been
completed with testing results of approximately 600 Boe/d over a period of
48 hours. The production rate for this well has yet to be determined. The
second well is awaiting completion operations. Two Central Montney vertical
wells (1.7 net) were also drilled and cased for production in July 2008.
    At least one additional Montney horizontal well and two exploration
vertical wells are planned for the Central Montney region in Q3 2008. Galleon
has access to over 193,000 gross acres of land in the Central Montney fairway.

    British Columbia Montney Project

    Galleon has access to over 40,000 gross acres of lands with Montney
potential in BC and western Alberta. The majority of these lands are located
close to Septimus and Parkland, BC. Galleon believes in the resource potential
of this Montney fairway and plans to test at least 4 Montney plays in this
region in Q3 2008.
    No wells were drilled in the BC Montney region in Q2 2008. Two Montney
horizontal wells identified on two different trends are planned in Q3 2008,
one of which is currently being drilled. One Montney vertical well (0.5 net)
was drilled and cased for production in July 2008. At least two vertical wells
are also planned to be drilled in Q3 2008. Contingent locations are being
surveyed in order to be ready to proceed pending successful results from the
wells drilled in third quarter 2008.

    Light oil projects

    The continued strength of Galleon's light oil portfolio was seen with the
drilling of 2 successful Devonian light oil wells (100% interest) at
Kimiwan/McLeans Creek, Alberta in June 2008. Both wells have been completed
and are currently being production tested. Three additional wells (2.5 net)
targeting Devonian light oil were drilled and cased for production in July
2008. Two wells are currently drilling potential light oil targets. Up to 11
additional light oil wells are planned for Q3 2008.

    Production update

    Second quarter 2008 production is expected to average approximately
16,100 to 16,500 Boe/d based on field report estimates. In April, May and June
2008, a prolonged spring breakup with extremely wet conditions affected
production, completion, pipeline and drilling activities in certain
properties. Galleon experienced some production disruptions in oil wells
located at Puskwa and Eaglesham, Alberta. These production disruptions were
related to bottom-hole pump repairs and installation operations that were
unable to occur until ground conditions improved. The wet conditions also
resulted in the temporary shut-in of certain existing oil production due to
the inability to truck out produced oil volumes in Edam, Saskatchewan and
Dreau, Alberta.
    Current production is in excess of 18,500 Boe/d based on field report
estimates. Exit 2008 production is targeted to exceed 23,000 Boe/d. In the
second half of 2008, Galleon plans to drill between 72 and 80 wells. The
drilling program is focused on natural gas and oil.

    
    Project                              Number of wells
    -----------------------------------------------------
    Eastern Montney horizontal                     16-24
    Kakut Central Montney & multizone                 16
    Eaglesham Central Montney & multizone             10
    Western Montney                                    8
    Mcleans Creek/Kimiwan                              8
    Puskwa                                             2
    Other                                             12
    -----------------------------------------------------
    Total                                          72-80
    -----------------------------------------------------
    

    Capital program expansion

    Galleon's 2008 capital program has been increased by $50 million to
approximately $280 million due to the success of the Montney horizontal
drilling program and new exploration oil and natural gas discoveries. The
expanded capital program is expected to be funded by cash flow. The expansion
of this program will focus on delineating new Montney pools with outpost
drilling and on construction of two new natural gas facilities to be located
in Dawson and Kakut, Alberta. At Dawson, a new plant with capacity of
10 Mmcf/d is planned for the southern end of the Eastern Montney pool.
Combined with the existing 30 Mmcf/d natural gas plant located 20 km to the
north, Galleon will have natural gas processing capacity of approximately
40 Mmcf/d in the area. The new plant is expected to be on-stream in Q1 2009.
Kakut is located in the Central Montney region and is expected to be a
significant growth area for Galleon. An owned natural gas plant at Kakut will
be expanded from 5 Mmcf/d to 15 Mmcf/d and is scheduled to be completed
towards the end of Q3 2008.

    ADVISORY: Certain information regarding Galleon in this news release
including management's assessment of future plans and operations, number, type
and timing of wells to be drilled, completed and tied-in, the plan and
development of certain prospects, production estimates, expected production
growth, expected timing of payout of wells, planned facilities expansion and
the timing thereof, expected capital expenditures and the method of funding
thereof, may constitute forward-looking statements under applicable securities
laws and necessarily involve risks including, without limitation, 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, 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.
    Forward-looking statements or information are based on a number of
factors and assumptions which have been used to develop such statements and
information but which may prove to be incorrect. Although Galleon believes
that the expectations reflected in such forward-looking statements or
information are reasonable, undue reliance should not be placed on
forward-looking statements because Galleon can give no assurance that such
expectations will prove to be correct. In addition to other factors and
assumptions which may be identified in this document, assumptions have been
made regarding, among other things: the impact of increasing competition; the
general stability of the economic and political environment in which Galleon
operates; the timely receipt of any required regulatory approvals; the ability
of Galleon to obtain qualified staff, equipment and services in a timely and
cost efficient manner; drilling results; the ability of the operator of the
projects which Galleon has an interest in to operate the field in a safe,
efficient and effective manner; the ability of Galleon to obtain financing on
acceptable terms; field production rates and decline rates; the ability to
replace and expand oil and natural gas reserves through acquisition,
development or exploration; the timing and costs of pipeline, storage and
facility construction and expansion; the ability of Galleon to secure adequate
product transportation; future oil and natural gas prices; currency, exchange
and interest rates; the regulatory framework regarding royalties, taxes and
environmental matters in the jurisdictions in which Galleon operates; and the
ability of Galleon to successfully market its oil and natural gas products.
    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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