Piceance Basin Project

Through its wholly owned subsidiary Dolphin Energy Corporation, Galaxy, in partnership with Exxel Energy Corporation, controls approximately 5,900 undeveloped acres (1,475 net to Galaxy) in the Piceance Basin. Galaxy believes that there are more than 250 potential drilling locations on its acreage.

The Dolphin/Exxel joint venture has commenced drilling the first two wells of a planned continuous drilling program in the area. Dolphin owns a 25% working interest in each of these two new wells.

In conjunction with its ongoing leasing program, Galaxy has completed acquisition of a 25% undivided interest in an oil & gas lease covering 187 acres in Garfield County, Colorado, a portion of which is located within a 320 acre proration unit for Williams Fork formation gas production from the Clough RWF 14-13 well. Dolphin acquired a 5.66% working interest in the Clough RWF 14-13 well after Williams Production RMT Company drilled and completed the well. The Clough well is operated by Williams and has been on production since December 2004, with cumulative gas production of approximately 158 million cubic feet through July 2005. Current production from this well is approximately 15 million cubic feet per month.

Galaxy, through Dolphin, also owns an 8.33% interest in a well operated by Antero Resources Company which is now in the completion process following six stages of fracture treatment stimulations. When fully completed and tested, a potential test will be announced for this well.
Dolphin’s initial contribution to the Piceance project is capped at the $7,000,000 already contributed to the project by Dolphin, and Exxel is committed to an initial contribution of $21,000,000. Exxel contributed $12,000,000 to the project and the project escrow account, and is required to contribute the balance of $9,000,000 as costs are incurred.

Galaxy commenced operations on its first operated well in December 2005, and actual drilling operations were underway in February 2006. The drilling rig has now moved to Galaxy’s second operated well in which surface casing was set with a small rig in January 2006, and operations are underway to drill ahead below the surface casing to total planned depth of approximately 9600'. Both wells target primarily the Williams Fork sandstones. Galaxy is also participating in an additional Antero Resources operated new well which has been drilled and stimulated with six individual frac treatments. Williams is the operator for another producing well in Garfield County in which Galaxy has a small working interest.

Galaxy has Unit Drilling Company’s Rig 132 under contract on its property in the Piceance Basin. The company anticipates that it will have a second rig in place by July. The intent is to be aggressive in drilling wells in the Piceance Basin, as long as adequate financing is available to fund these projects.

Galaxy has completed the initial design of the fracturing plan for its first operated well in the basin and is now beginning the completion process for this well. It is the company’s goal to have as many as four wells drilled and/or being completed by fall of 2006.
Galaxy presently has drilling permits for four well locations in the basin, with nine permits pending.

Click here to read: Piceance Basin - An Overview (excerpt from Oil and Gas Investor August 2005)