Galaxy Energy Enters Discussions Regarding the Sale of a Portion of Its Powder River Basin Assets

    DENVER, CO, Sept. 4 /CNW Telbec/ - Galaxy Energy Corporation (Amex:   GAX)
and its wholly owned subsidiary Dolphin Energy Corporation have begun
discussions with unrelated companies regarding the potential sale of a portion
of its leaseholds in the Powder River Basin in Wyoming following a decision by
Galaxy and PetroHunter Energy Corporation, a related party, not to further
extend their Purchase and Sale Agreement dated December 29, 2006, as amended.
Galaxy intends to sell a portion of the Powder River Basin assets with
sufficient market value to allow Galaxy to either fully repay or substantially
repay its senior debt.
    Dolphin owns an average 86% working interest in 197 oil and gas wells in
the Powder River Basin. Twenty-two wells are currently selling gas at an
average rate of about 490,000 cubic feet per day. The remaining wells are in
various stages of dewatering, shut-in waiting on pipeline, or waiting to be

    Amex Update

    In June 2007, Galaxy submitted a plan to the American Stock Exchange
(Amex), to advise Amex of action the company has taken, or will take, that
would bring Galaxy into compliance with all of Amex's continued listing
standards. These actions included an agreement for proposed sale of Galaxy's
oil and gas assets in the Powder River Basin to PetroHunter Energy
Corporation, a related party. The agreement with PetroHunter expired on August
31, 2007 and will not be extended. Galaxy has communicated the new
developments to the Amex and will submit a new plan demonstrating how the
company intends to regain compliance with the exchange's continued listing
requirements. No assurances can be given that the plan will be accepted by

    About Galaxy Energy

    Galaxy Energy Corporation, a development stage oil and gas exploration
and production company, focuses its operations in the Powder River Basin of
Wyoming and the Piceance Basin of Colorado, in addition to exploration
activities in Germany and Romania. Galaxy conducts its exploration activities
through two wholly owned subsidiaries, Dolphin Energy Corporation and
Pannonian International, Ltd.

    Forward Looking Statements

    This press release consists of forward looking statements regarding the
intent, belief or current expectations of Galaxy and its management.
Prospective investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve a number of risks and
uncertainties, and actual results could differ materially from those indicated
by such forward looking statements. Galaxy assumes no obligation to update the
information contained in this press release, whether as a result of new
information, future events or otherwise. Please refer to Galaxy's filings with
the United States Securities and Exchange Commission for discussions of risks
and uncertainties found in Forms 10-K (annual report), 10-Q (quarterly report)
and other filings.

    Additional information may be found at the Galaxy Energy Corporation Web
site, or by calling Brad Long, Investor Relations/Galaxy
Energy at (800) 574-4294, Bevo Beaven or Warren Laird of CTA Integrated
Communications at (303) 665-4200.

For further information:

For further information: Renmark Financial Communications Inc.: Neil
Murray-Lyon:; Dan Symons:, (514) 939-3989, Fax: (514) 939-3717;

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