Coastal Energy Provides Operational Update and Announces Mobilization to
Songkhla B Exploration Prospect

/THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH UNITED STATES NEWSWIRE SERVICES/

    
    AIM: CEO
    TSX-V: CEN
    

HOUSTON , Dec. 30 /CNW/ - Coastal Energy Company (the "Company" or "Coastal") (TSX-V: CEN, AIM: CEO), an independent exploration and production company with assets in Thailand , announces an update to operations in the Gulf of Thailand .

The Company is presently mobilizing the Atwood drilling rig from Songkhla A to the Songkhla B exploration prospect. The Songkhla B exploration prospect is expected to spud by the end of the week with initial results by late January.

Total production from Songkhla A is approximately 7,000 bopd from the A-01, 03, 07 & 08 wells. The recently completed A-04 is down due to mechanical pump issues. A hydraulic workover unit is being mobilized to remedy the A-04 well and to install larger pumps on the A-01 and A-03 wells.

Randy Bartley , Chief Executive Officer of Coastal Energy, commented:

"We have had some issues with the downhole mechanical pumps and they are being appropriately addressed. The production disruptions that we have experienced are entirely mechanical in nature and do not reflect on the quality or expected performance of the reservoir.

"As a result of these disruptions and other downtime associated with drilling, we expect our fourth quarter production to average approximately 5,400 bopd. We expect production at Songkhla A to return to the approximate 10,000 bopd level once workover operations are completed on the A-04 well in late January.

"We are now looking forward to turning our focus to the Songkhla B exploration prospect."

The Company also announces that the first hydraulic fracturing program has been completed on the Phu Kheng-1 well on Block L 27/43 onshore Thailand (Coastal 36.1% interest). Limited gas flows were seen following the completion of the frac test. The operator is now determining the forward program, which might include fracturing of shallower zones where gas shows were seen during drilling. The EMAS EE-2 hydraulic workover unit remains on-standby at zero cost ahead of conducting the second test.

The testing program on the Si That-3 well on Block L 13/48 onshore Thailand (Coastal 21.7% interest) is ongoing and awaiting the arrival of equipment.

Additional information, including the Company's complete competent person's report may be found on the Company's website at www.CoastalEnergy.com or may be found in documents filed on SEDAR at www.sedar.com.

This statement contains 'forward-looking statements' as defined by the applicable securities legislation. Statements relating to current and future drilling results, existence and recoverability of potential hydrocarbon reserves, production amounts or revenues, forward capital expenditures, operation costs, oil and gas price forecasts and similar matters are based on current data and information and should be viewed as forward-looking statements. Such statements are not guarantees of future results and are subject to risks and uncertainties beyond Coastal Energy's control. Actual results may differ substantially from the forward-looking statements.

These securities have not been registered under United States Securities Act of 1933 (the "US Securities Act") or the securities laws of any state and may not be offered or sold in the United States or to US persons (as defined in Regulation S under the US Securities Act) unless an exemption from registration is available.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

For further information: Enquiries: Coastal Energy Company, Randy L. Bartley, Chief Executive Officer, [phone]; William C. Phelps, Chief Financial Officer, [phone]; Email: [email protected]; Strand Hanson Limited (Nominated Adviser), Rory Murphy, Paul Cocker, [phone]; Thomas Weisel Partners (Broker), Paul Colucci, [phone]; Macquarie Capital (Europe) Limited (Broker), Ben Colegrave, Paul Connolly, [phone]; Buchanan Communications, Tim Thompson, Catherine Breen, Katharine Sutton, [phone]