Coastal Energy Announces Drilling Update

  Coastal Energy Company (the "Company" or "Coastal") (TSX-V: CEN) (AIM: CEO) announces an update of its operations in the Gulf of Thailand.

The sidetrack of the Songkhla A-12 well has made a new discovery east of the recent discovery made by the Songkhla A-09 well. The A-12 encountered pay zones in both the Oligocene and Eocene reservoirs. Analysis of the data indicates both reservoirs are separated from the Songkhla Main reservoir by a 400 foot fault. The A-12 encountered 105 feet of net pay in the Oligocene with 20% porosity and 43 feet of net pay in the Eocene with 19% porosity. The Company's oil in place estimate for this newly discovered Oligocene reservoir is over 20 million barrels. The Company expects to have this well completed within the next week.

The previously announced A-11 well, which encountered 69 feet of net pay in the Eocene reservoir, is currently being flow tested. Currently only the Eocene is being tested and it is producing approximately 300 bopd. The A-11 also encountered 44 feet of net pay in the Oligocene reservoir with 18% porosity. The Company plans to commingle production from the Oligocene reservoir later this month once the flow test of the Eocene reservoir is completed.

Following completion of the A-12 well, the Company is planning to sidetrack the previously drilled Songkhla A-07 well targeting the reservoir discovered by the Songkhla A-09 well.

The fracture stimulation of the Eocene reservoir in the Bua Ban A-04 well is expected to commence the week of January 23rd.

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

"Drilling at Songkhla has continued to produce successful results. We now have three newly discovered reservoirs apart from the main Songkhla reservoir. Given the encouraging results, we have decided to drill one further development well to bring more production online before moving the rig. We will continue evaluating future appraisal and development well locations and plan to return to Songkhla later this year.

"Once drilling is completed at Songkhla, we will move to our high impact exploration targets at Bua Ban North. We plan to issue the next operations update at the end of the month."

Randy Bartley, President and Chief Executive Officer of the Company and a member of the Society of Petroleum Engineering and Jerry Moon, Vice President, Technical & Business Development, a member of the American Association of Petroleum Geologists, a Licensed Professional Geoscientist and a Certified Petroleum Geologist in the state of Texas, have reviewed the contents of this announcement.

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.

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Enquiries: Coastal Energy Company Email: Email Contact [phone] Strand Hanson Limited (Nominated Adviser) [phone] Rory Murphy Paul Cocker Stifel Nicolas Weisel (Broker) [phone] Paul Colucci Macquarie Capital (Europe) Limited (Broker) [phone] Ben Colegrave Paul Connolly Buchanan Communications [phone] Tim Thompson Katharine Sutton Ben Romney