On December 29, 2006, PetroHunter Energy Corporation (“PetroHunter”) and its wholly owned subsidiary, PetroHunter Operating Company, entered into a Purchase and Sale Agreement (the “PSA”) with Galaxy Energy Corporation (“Galaxy”) and its wholly owned subsidiary Dolphin Energy Corporation (“Dolphin”). Pursuant to the PSA, PetroHunter agreed to purchase all the Seller’s oil and gas interests in the Powder River Basin of Wyoming and Montana (the “Powder River Basin Assets”). A copy of the PSA is attached hereto as Exhibit 2.1 and is incorporated by reference herein.

Marc A. Bruner, who has a 32% beneficial ownership interest and is the largest shareholder in PetroHunter, also is a 14.3% beneficial shareholder of Galaxy. Marc A. Bruner is the father of Marc E. Bruner, the President, Chief Executive Officer and director of Galaxy. Marc E. Bruner is the stepson of Carmen J. Lotito, the Chief Financial Officer and a director of PetroHunter.

The purchase price for Powder River Basin Assets is $45 million, with $20 million to be paid in cash and $25 million to be paid in PetroHunter common stock at the rate of $1.50 per share.

Closing of the transaction is subject to approval by Galaxy’s secured noteholders, approval of all matters in its discretion by PetroHunter’s Board of Directors, including PetroHunter obtaining outside financing on terms acceptable to its Board of Directors, and various other terms and conditions. Either party may terminate the agreement if closing has not occurred by February 28, 2007.

Within ten (10) days of signing the PSA, PetroHunter Operating Company will make an initial earnest money payment of $1.4 million. On or before January 31, 2007, PetroHunter Operating Company will make an additional earnest money payment of $600,000. In the event the closing does not occur for any reason other than a material breach by PetroHunter Operating Company, the deposit shall convert into a promissory note (the "Note"), payable to PetroHunter Operating Company, and shall be an unsecured subordinated debt of both Galaxy and Dolphin, which is payable only after repayment of Galaxy’s and Dolphin’s senior indebtedness.

PetroHunter Operating Company became the contract operator of the Powder River Basin Assets beginning January 1, 2007. At closing, the operating expenses incurred by PetroHunter Operating Company as the contract operator will be credited toward the purchase price, or if closing does not occur, will be added to the principal amount of the Note.

MAB Resources LLC, of which Marc A. Bruner is sole owner, has orally agreed to guarantee the performance of Galaxy and Dolphin under the PSA (including but not limited to all their obligations under the Note), and has orally agreed to reimburse PetroHunter and PetroHunter Operating Company for certain losses and damages which might be incurred as a result of those parties entering into the PSA. A written agreement will be executed prior to closing.

Item 7.01. Regulation FD Disclosure

On January 3, 2007, PetroHunter issued a press release announcing execution of the PSA. The press release is furnished herein as Exhibit 99.1.

The information contained in this Item 7.01, including Exhibit 99.1, is “furnished” pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, unless this report is specifically

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