Petrolifera locks in $47 (U.S.) price for Argentina oil

2008-06-10 12:40 ET - News Release
Shares issued 50,353,010
PDP Close 2008-06-09 C$ 9.39

Mr. Richard Gusella reports

PETROLIFERA PETROLEUM SECURES NEW OIL PRICING ARRANGEMENT FOR ARGENTINA; PROVIDES OPERATIONS UPDATE

Petrolifera Petroleum Ltd. has completed an agreement with the major purchaser of its Argentinean crude oil sales volumes, whereby effective June 1, 2008, and including May, 2008, sales, which are settled in the subsequent month, Petrolifera will now receive $47 (U.S.) per barrel of Puesto Morales Medanito crude oil. This represents an increase of approximately $5 (U.S.) per barrel of crude sold into the market. The agreement also anticipates a favoured nations provision and further timely adjustments in the event of changes to prevailing export tax provisions in Argentina. The modification reflects the impact of market forces as opposed to any legislative changes in the country.

Furthermore, Petrolifera is scheduled to receive a significant cash payment of a minimum of $2.50 (U.S.) plus valued added tax (IVA) for each of the approximately 1.4 million barrels of crude oil which have been delivered to the purchaser since late in 2007, until the new arrangement became effective in 2008. This price improvement and payment for previously delivered crude oil will positively impact on Petrolifera's reported revenue, cash flow and liquidity for the remainder of 2008.

Petrolifera continues to conduct drilling and testing operations in Argentina. Current crude oil sales at Puesto Morales Norte exceed 8,000 bbl/d and oil equivalent sales were 9,028 boe/d in April 2008, compared to 8,180 boe/d year to date in 2008 and approximately 32 percent above April 2007 sales of 6,450 boe/d. Readers are cautioned that all references to barrels of oil equivalent (boe) are calculated on the basis of 6 mcf:1 bbl. Boes may be misleading, particularly if used in isolation. This conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Sales and production increases during the balance of 2008 are anticipated to be derived from the impact of the company's pressure maintenance program at Puesto Morales Norte, anticipated to reach peak influence in the second half of 2009. It is also anticipated that further production and consequent sales increases will derive from continuing development drilling at Puesto Morales Norte and from higher impact exploratory drilling at Puesto Morales Este, Rinconada Norte, Vaca Mahuida and Gobernador Ayalla II, where in total up to 16 gross wells (approximately two new wells per month) are anticipated by year end.

Petrolifera is currently testing the Sierras Blancas Formation in its 1082 well, a deviated exploratory test drilled under the Casa de Piedra water reservoir resulting from the hydroelectric dam on the Rio Colorado. Based on log analysis and shows while drilling, crude oil was indicated to be present in the Sierras Blancas Formation and the deeper Punta Rosada Formation. Despite encouraging indications, the Punta Rosada Formation will not be tested due to hole conditions and evaluation will have to await follow-up drilling activity. The 1082 well is situated approximately 1.25 kilometers southeast of the known limits of the central structure at Puesto Morales Norte, where prolific productivity and significant volumes of oil have been produced from a number of wells, including 1012, 1013 and 1061. Depending upon test results, the 1082 well will be completed and tied in to production facilities once the evaluation is completed. Petrolifera has a 100 percent interest in Puesto Morales Norte and the 1082 well.

Petrolifera also reports that the PME x-1002 well, the second well drilled on the Puesto Morales Este Block, has been completed as a new pool Loma Montosa Zone 2 crude oil discovery. On test and after a frac, the well flowed at a rate of 458 bbl/d of light gravity crude oil through a 20 millimeter choke. This well is approximately 3.5 kilometers north of the PME x-1001 Loma Montosa natural gas well and five kilometers southeast of the central lobe at Puesto Morales Norte. Drilling of this well completes the work program negotiated in conjunction with the awarding of this block. Petrolifera has a 100 percent interest in Puesto Morales Este Block and the PME x-1002 well.

In Colombia, Petrolifera is continuing to finalize its plans to drill two exploratory wells on two separate prospects (La Pinta and Brillante) on its onshore Sierra Nevada I License in the Lower Magdalena Basin. Subject to finalizing rig availability and receipt of the drilling environmental impact assessment ("EIA"), both of which are anticipated to be resolved in the near term, Petrolifera's drilling could be underway on the first of two high impact Colombian locations by mid-August 2008. Applications to convert the company's other landholdings to license status have been submitted and await governmental approval.

In Peru, the seismic program over Block 107 has progressed favorably. As anticipated, numerous sizeable leads and potential prospects have materialized. As a result of this encouragement from the company's seismic program, Petrolifera is in the process of negotiating another concession in the region to complement its existing holdings. Further details will be provided upon completion of negotiations.

We seek Safe Harbor.