Galleon announces drilling results in Fourth Quarter 2008 and significant increase in Montney production

CALGARY, Dec. 16, 2008 (Canada NewsWire via COMTEX) -- GLNYF | Quote | Chart | News | PowerRating -- Galleon Energy Inc. ("Galleon") (TSX: GO) is pleased to announce another quarter of successful drilling results.

<< Highlights: - To date, in Q4 2008, Galleon has drilled 30 wells with twenty-six wells (25.1 net) cased for production; a success rate of 87%. Five wells (5 net) were cased for light oil, three wells (3 net) were cased for heavy oil, two wells (1.6 net) were cased for conventional gas, three wells (2.9 net) were cased for gas in the Central Montney area and thirteen wells (12.6 net) were cased Eastern Montney horizontal gas wells. Two wells are currently drilling. - A significant gas pool has been delineated in the Central Montney fairway. Five wells (average 80% interest) are currently producing in aggregate at a restricted rate of over 8 Mmcf/d gross from this Montney pool. These five wells are expected to produce, in aggregate, at an initial rate of 14 Mmcf/d gross once the facility upgrade has been completed in the first quarter of 2009. - A second Central Montney fairway has been further delineated. Three wells are currently producing in aggregate over 4 Mmcf/d net from the Montney zones and one well remains to be completed. - These two Central Montney development projects have come on stream at costs (including drilling, completion, tie-in and facility costs) on average of less than $10,000 per producing BOE. These projects have relatively long life reserves. - Including the thirteen (12.6 net) Eastern Montney horizontal wells drilled in Q4 2008, in aggregate, twenty-four Eastern Montney horizontal wells (23.6 net) will be drilled in 2008. On stream costs (including drilling, completion, tie-in and facility costs) on average for the project are less than $10,000 per producing BOE. The current production from the Eastern Montney area exceeds 4,600 BOE/d net (25.5 Mmcf/d and 350 Bbl/d oil and liquids). - Current production is in excess of 19,000 BOE/d based on field report estimates. - In November 2008, Galleon's banking syndicate comprised of six banks confirmed available credit facilities of $310 million. The 2009 drilling program will continue to focus on low risk development wells with the objective of organic growth funded by cash flow. Low cost production additions and cost control in all areas continues as a high priority. Discovery in one Central Montney project leads to a new core area ----------------------------------------------------------------- >>

Galleon is pleased to confirm that recent drilling has delineated a significant Montney gas pool in the Central Montney fairway. This has resulted in significant production growth and reserve additions based on internal evaluations.

Production from this pool has grown from approximately 1.7 Mmcf/d (72% interest) in Q2 2008 to the current restricted rate of over 8 Mmcf/d gross with an additional 6 Mmcf/d gross of production waiting on facility upgrade. The 100% Galleon owned facility will be upgraded to 15 Mmcf/d and is scheduled for completion in Q1 2009.

Based on the five wells drilled to date and 3D seismic interpretation, Galleon has delineated a pool that it estimates is approximately 10 sections in size. This project yields high deliverability rates at a low cost. Galleon plans to drill up to 4 additional wells on single section spacing to further prove any expansion to this pool in 2009. Over the life of the project, full development will require in excess of two wells per section.

<< Second Central Montney project with multi year drilling upside -------------------------------------------------------------- >>

Galleon has a second Central Montney project which has been delineated in 2008. The current Montney production from this project is over 4 Mmcf/d net from three wells. The project is unique in that it has 7 gas charged Montney sands. To date, 4 sands have been tested of which 2 of these are contributing to current production. The remaining two sands are not on production as the sulphur content exceeds the plant specifications. A recent well has been drilled with the intent of testing 2 Montney gas sands which are anticipated to be sweet. Galleon plans to drill one horizontal well into a mid Montney sand in first quarter 2009. An application for down spacing for all of the Montney horizons has been submitted.

<< Eastern Montney project delivers record production -------------------------------------------------- >>

In Q4 2008, Galleon has drilled 13 Eastern Montney horizontal wells with multistage fractures. One horizontal well is currently drilling. By year end 2008, 24 horizontal wells will have been drilled. Currently 20 (19.6 net) horizontal wells are producing approximately 3,600 BOE/d net (20 Mmcf/d and 267 Bbl/d of oil and liquids).

The 2009 plan is to drill up to 27 horizontal wells of which 14 wells are planned in the first half of the year. Processing capacity for this project will be expanded to 40 Mmcf/d in 2009.

Although Galleon is in the early stages of applying horizontal completion techniques, the results to date have exceeded expectations. The horizontal wells have consistently shown an improvement of 2 to 3 times the deliverability of the offset vertical wells. The incremental cost of a horizontal well is approximately 50% more than a vertical well.

In addition to the higher initial rates seen in the horizontal wells, another advantage is that the decline rates stabilize much sooner than the offset vertical wells. In the horizontal wells with over 5 months of production history, the production declines have stabilized in 3 to 4 months compared to the offset vertical wells that take approximately 12 months to stabilize.

Montney production has increased from 2,450 BOE/d net in Q2 2008 to over 4,600 BOE/d net today. The high deliverability and producing pressure of the horizontal wells has backed out from the gathering system about 1,000 BOE/d of production from the vertical wells. Much of this backed out production is expected to be restored once field optimization activities are completed in 2009.

In the Eastern Montney project, as at December 31, 2007, proved plus probable reserves of approximately 60 Bcf were assigned by Galleon's independent engineering evaluator on approximately 40 sections of land. In 2008, an additional 30 sections have been delineated through drilling and added into the developed area. Reserves have not yet been evaluated and assigned to these sections. Within the mapped boundaries of the pool, Galleon has access to over 150 sections of land. Galleon has identified approximately 300 horizontal locations.

On December 15, 2008, the Class B shares were converted into Class A shares. There are approximately 75.2 million Class A shares outstanding. The Class A shares trade on the TSX under the symbol "GO".

Galleon Energy Inc. is one of the largest land holders in the prolific Peace River Arch area of northwest Alberta and northeast British Columbia. Galleon has assembled an extensive prospect inventory of high netback light oil and natural gas projects, including substantial exposure to multiple high impact drilling projects. The high impact drilling projects include the Eastern and Central Montney resource gas play projects, horizontal tight gas projects and light oil projects at Eaglesham, Kimiwan/Culp/McLeans Creek and Puskwa.

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, production estimates, drilling, testing and completion plans and the timing thereof, planned facilities expansion and the timing thereof, availability under credit facilities, expected production rates and production additions from certain projects 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.

The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation. Galleon's aggregate proved plus probable reserves were 59.9 million BOE at December 31, 2007.

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), or 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.

SOURCE: Galleon Energy Inc.

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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