September 21, 2010

Recommendation: SPECULATIVE BUY PETROLIFERA PETROLEUM LIMITED 12-Month Target: C$1.20 (TSX-PDP .64) Risk Rating: ABOVE AVERAGE

PETROLIFERA ANNOUNCES REVIEW OFSTRATEGIC ALTERNATIVES

Petrolifera has formed a special committee to examine strategic alternatives for the Company. The committee is not limited in its scope, and all options will be considered including, among other things, a corporate sale, farm-outs, asset sales and recapitalizations. (page 2)

This process offers the opportunity to acquire higher interests in key properties. Petrolifera has already been running data rooms to attract potential partners in its Colombian and Peruvian properties. By expanding the process to the corporate level, those entities may now be able to acquire up to 100%, rather than the lower interests earned in a farm-in. This could be more attractive than carrying a minority partner through earning and in development thereafter. (page 2)

Long-term production test on Brillante SE-1X should boost reserves assessment. The production phase was concluded after withdrawals of 66 MMcf over a 3-week period. Production rates and pressures increased marginally through the test. A more definitive analysis will come from the pressure build up (currently underway). The Company expects to retrieve the pressure recorders in approximately six weeks. We believe that this data is likely to validate at least our minimum estimate of 60 Bcf, possibly more. (page 5)

Broken up, we see a potential value range between $1.00 and $2.19 per share. We have looked at potential value ranges for the three operating areas using various methods that we deem appropriate to the assets in each. This range excludes any consideration for the exploration leads and prospects, which we estimate have a risked potential value of nearly $4.00/sh ($32.70 unrisked). (pages 3, 8)

We are maintaining our SPECULATIVE BUY recommendation and our 12-month target price of $1.20per share.

Petrolifera Petroleum Limited is a junior energy company with operations in the Neuquen basin of Argentina, and exploration concessions in Peru and Colombia.

Sector: OIL & GAS

Analyst: GREGORY CHORNOBOY

e-mail: greg.chornoboy@jenningscapital.com

Tel: (403) 292-9485 Fax: (403) 262-0904

Company Statistics

Market Cap $93 MM

Basic Shares O/S 145.5 MM

Fully Diluted Shares (treasury method) 145.5 MM

Fully Diluted Shares (all options and warrants) 188.6 MM

52-Week Range $1.31 - .55

Major Shareholders Connacher Oil & Gas Ltd. 26.9 MM

Cash (09/30/10 act.) $26.8 MM

LT Debt (09/30/10 act.) $41.9 MM

Working Capital (09/30/10 act.) $14.8 MM

Earnings Summary

FYE: December 2009A 2010E exit2010E 2011E

Production (BOE/d) 5,215 3,900 3,8023,510

WTI (US$/Bbl) $61.69 $76.43 $75.00 $79.00

EPS (FD)(.12)(.06)(.07) (.06)

CFPS (FD).60 .17 .16 .13

DACF .67 .20 .18 .15

Debt ($MM) $21.2 $43.0 $38.0 $25.4

P/E nm nmnm nm

P/CF 1.1x 3.8x 4.1x 4.8x

DACFM 2.5x 4.8x 4.9x 5.7x

Valuation Metrics

EV/BOE/d $17,964 #DIV/0! $33,353 $30,926

EV/BOE (est. 2P) ($/BOE) $7.79

Price/NAV 55%

Price/ExNAV 18%

Implied Value of Potential Resources *

Unrisked ($/BOE) ( 0.21)

Risked ($/BOE) ( 0.97)

* =(EV - PV13 of 2P reserves)/potential resources

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The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

Petrolifera Announces Review of Strategic Alternatives

On September 7, Petrolifera announced the initiation of a process to review strategic alternatives to enhance shareholder value. A special committed has been formed consisting of Andrew Gustajtis, Gordon Johnston, and Christopher Smith, all independent directors. Mr. Smith, who is also Chairman of the Audit Committee, will chair the Special Committee. The Company is in the process of retaining RBC Capital Markets as its financial advisor. The scope of the possible alternatives has not been limited in any way. We believe the most likely outcome will be a corporate transaction of some sort. The Company was already running marketing efforts to farm-out both its Peruvian and Colombian properties and also attempted (unsuccessfully) to sell the Argentine operations last year. Announcing a strategic review adds the possibility of acquiring 100% working interests rather than earning something less in a farm-in. A corporate transaction, such as a sale, merger or recapitalization potentially changes the basis of our previous evaluation in two ways:

• Our former NAV calculations were on the basis of a “going concern” and included the present value of the G&A burden required to run the Company amounting to over $33 million (.23/sh, basic). In a corporate sale, the buyer will likely already have its own corporate infrastructure in place, and those costs could be reduced to $10 million or less (consisting of severance costs, lease obligations, investment banking fees and the present value of any retained G&A costs), for net gain of .16/sh.

• Our 12-month NAV and ExNAV calculations formerly included likely farm-outs in Colombia (down to 50%) and Peru (down to 25%). A large, well capitalized buyer might not need to farm down and would therefore retain the full (or at least higher) working interest for itself. It could, of course, still go in pieces and in mind of that, we have evaluated the Company as a sum of those pieces, based on our estimate of what each segment could be worth, summarized in the table below:

Petrolifera – Segmented Valuation

($MM)($/sh) ($MM) ($/sh)

Argentina (1) $69.8 .46 $120.1 .64

Colombia (2) $27.0 .18$161.3 .86

Peru (2) $56.3 .37 $90.0 .48

Corporate.00

Working Capital $14.8 .10$14.8 .08

Option/Wt Proceeds $7.0 .05 $49.4 .26

Notes $9.6
.06 $9.6
.05

Debt ($22.5) (
.15) ($22.5) (
.12)

Other ($10.0) (
.07) ($10.0) (
.05)

$152.0 $1.00 $412.7 $2.19

Minimum Maximum

1 Net of the $34.8 million of debt backed by the Argentine reserves.

2 Valued on break up basis, no further farm-outs in Peru or Colombia.

3 The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

Each of the three operating areas has additional upside potential which is not included in the value ranges above. Substantially all of that is exploration based, for which it would be difficult for a potential purchaser to explicitly pay. As such, we believe it is more likely that this exploration portfolio could influence the price paid upward within the basic value ranges unless or until any of those leads or prospects are drilled and proven during the strategic value initiative. That upside potential is summarized below:

Petrolifera – Upside Exploration Potential

Gross Resources WI Resources

Argentina 1 1,003 (MBOE) 6 ,631 $74 .39 $32 .17

Colombia 4 5,025 (MBOE) 40,025 $688 $3.65 $181 .96

Peru 200,833 (MBOE) 200,833 $5,400 $28.66 $540 $2.87

2 56,861 247,489 $6,161 $32.70 $753 $3.99

Unrisked Value Risked Value

The Current Whole Does Not Reflect the Sum of the Parts

Argentina

With assessed reserves, production and cash flow, we believe it is appropriate to value the Argentine assets on an NAV and cash flow multiple basis.

NAV – Sept 30, 2010 (1) Cash Flow Valuation (2)

($MM) 4x 5x

AT PV10 $193.3 ($MM) ($MM) ($MM)

AT PV15 $159.8 2010 Cash Flow $26.2 $104.6 $130.8

AT PV13 $173.2 less Debt ($34.8) ($34.8)

Current Price Deck ($6.0) Net Value $69.8 $96.0

YTD Production ($11.5)

AT PV13, adjusted $154.9

Debt ($34.8)

NAV $120.1

(1) AT PV10 and AT PV15 values as per GLJ Petroleum Consultants as at December 31, 2009.

Adjustments estimated by JCI.

(2) Cash flow estimated by JCI for Calendar 2010.

Petrolifera’s Argentine assets consist of interests ranging from 25% to 100% in five blocks in the Neuquen Basin. Various farm-out agreements have been executed, and while not all of the earning requirements have been fulfilled, we are reasonably confident that they will. All the 2P reserves and production are within the Puesto Morales block (PDP 100%). There has been drilling in several of the other blocks, but no reserves had yet been assigned at year end 2009.

The Company has a credit facility backed by its reserves, upon which we estimate $34.8 million will be drawn at the end of September. From the Q1 rate of 3,706 Bbl/d, meeting the proved developed reserves of 3.9 MMBbl would require a decline rate of ~28% per year, substantially consistent with the actual rate observed since the beginning of 2009. The Q2 rate of 3,356 Bbl/d suggests, on the surface, an annual decline of 36%, but was affected by downtime for equipment maintenance, workovers on two wells and pump failure on a third. Overall, 2010 production to date appears to be consistent with the year end reserves assessment.

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The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

A potential risk is the high proportion of Proved Undeveloped (27%) and Probable (42%) reserves relative to the total 2P reserves. When proved developed reserves constitute less than 50%, some acquirers may increase their discount rate to compensate for more of the reserves being in the riskier categories. We believe that our 13% (after tax) rate adequately compensates for this.

The assigned multiples of 4x and 5x are based on our flat to declining expectation for production and cash flow from the Argentine assets. Other companies in our South American coverage universe trade at multiples of 8x or higher, but their expected year-over-year production growth is between 25% and 35%. As mentioned above, we anticipate a continuing 28% decline rate in the Puesto Morales field on the existing wells, to be offset by further development drilling to bring on the undeveloped and probable reserves and the upside potential from the other blocks.

Upside Potential The Argentine blocks have additional upside potential, as summarized in the table below:

Upside Potential – Argentina Gross Resources PDP WI WI

Resources Unit Value COS

($/Bbl or $/Mcf) ($MM) ($/sh) % ($MM) ($/sh)

Rinconada 5 ,000 (MBbl) 35% 1,750 $10.75 $19
.10 40% $8
.04

Vaca Mahuida 1 5 (Bcfe) 25% 4
.60 $2
.01 75% $2
.01

Puesto Morales/ PM Este 4 ,000 (MBbl) 100% 4,000 $10.75 $43
.23 50% $22
.11

Puesto Guevara 2 ,000 (MBbl) 44% 880 $10.75 $9
.05 10% $1
.01

Gobornador Ayala II - (MBbl) 100% 0 $10.75

.00 10%

.00

6,634 $74
.39 $32
.17

Unrisked Value Risked Value

We have not included this upside potential in our valuation for several reasons including, among other things, the timing of the drilling to validate the prospects. In the case of Vaca Mahuida, despite the high chance of success (3 wells in aggregate tested over 7 MMcf/d from several zones earlier this year), there is uncertainty over whether it will receive “Gas Plus” pricing, and when the wells could be tied into a gathering system. Petrolifera and its partners would likely receive over $4/Mcf under Gas Plus, whereas their existing production realized only $2.66/Mcf in Q2 (our value of .60/Mcf is based on Gas Plus, whereas it could drop to as low as
.20 without Gas Plus, depending on operating and F&D costs). We also allow for the possibility that Puesto Guevara could be gas prone, as Vaca Mahuida seems to be, as it lies even further to the south.

Colombia

Colombia – Realizable Values Minimum Maximum

($MM) ($MM)

Brillante $27.0 $45.0

La Pinta

Porquero
.0 $38.8

CDO
.0 $77.5

$27.0 $161.3

Petrolifera has over 824,000 net acres in three licence blocks, Sierra Nevada (100%), Magdalena (100%) and Turpial (50%). There were a small amount of 5

The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

probable reserves assigned to La Pinta at year end 2009. Subsequent to year

end, the Company made a gas discovery at Brillante and furthered work at La Pinta (see below) on the Sierra Nevada Licence. It also plans to drill an exploration well at San Angel on the Magdalena Licence in Q4 this year. The operator of Turpial, Apco Oil and Gas, will likely drill the first exploratory well in early 2011.

In April, the Company announced the first results from Brillante SE-1X, which flowed at 8.4 MMcf/d at a wellhead pressure of 579 psi. A long-term production test was completed yesterday, after total withdrawals of 66 MMcf and small amounts of condensate and water. There were no signs of depletion during the flow period (the rate and pressure both actually strengthened marginally), but more definitive results will depend on analysis of the pressure build up. While we have previously estimated the potential size of the Brillante discovery between 60 and 290 Bcf, it is difficult to see how the upper end of that range can be validated to the point of being assigned 2P reserves within the next 6 to 9 months. Full assessment will require more appraisal drilling and production and pressure information. As such, in our best case, we could see perhaps 100 Bcf with the logs and long-term test on the Brillante SE-1X well. Valued at
.45/Mcf (see tables below), that gives a value range of between $27 and

$45 million.

Colombia – Unit Values

($/Bbl) ($/Mcf)

Oil Price $76.00 Gas Price $4.50

Royalty 9% ($6.84) Royalty 20% (
.90)

Opex ($9.35) Opex ($1.00)

Field Netback $59.81 Field Netback $2.60

Tax 35% ($15.68) Tax 35% (
.65)

AT Netback $44.13 AT Netback $1.95

PV 3 years $30.58 PV 4 years $1.20

F&D Costs ($15.00) F&D Costs (
.75)

Unit Value $15.58 Unit Value
.45

The La Pinta-1X well tested two formations, the Cienaga de Oro (“CDO”) and the Upper Porquero. Neither test conclusively validates any new reserves, although for different reasons:

• Testing from the CDO was inconclusive – there was a casing failure and the highly unconsolidated formation plugged the tubing with sand and gravel 30 minutes into the test, although instantaneous rates were 770 Bbl/d. Subsequent remedial efforts were unsuccessful. The potential is very high – the recoverable volumes could be between 10 and 40 MMBbl, and at $15.50/Bbl could add at least $1.00/sh to NAV.

• The Upper Porquero zone produced 139 Bbl/d and 740 Mcf/d on test. This was not a particularly compelling rate for a 7,800 ft well, and we believe that it may require some form of stimulation (likely a frac’) to be economically viable. Assuming that the frac’ works however, the Company estimates that recoverable volumes could be between 8 and 15 MMBbl. In the worst case, a buyer may not recognize any reserves for either the CDO or Porquero zones: The CDO has not yet been proven by a proper test, and the low rates on the Porquero may not be economic.

6 The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings

Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

At the upper end, using 10 MMBbl and 20 MMBbl for the Porquero and CDO, respectively (both values within the lower third of the expected ranges), and a unit value of $15.50/Bbl, we get an unrisked value of $465 million. There are, however, considerable technical risks associated with being able to complete the wells economically for production, the size of the reserves, and capital costs (particularly with the CDO as the ~8,000 psi reservoir pressure could add considerably to drilling costs). Accordingly, we believe that a 25% chance of success is appropriate, which results in an aggregate value of $116 million.

Upside Potential

Gross

Reserves WI

WI

Resources Unit Value COS

($/Bbl or $/Mcf) ($MM) ($/sh) % ($MM) ($/sh)

La Pinta Porquero 1 0,000 (MBbl) 100% 10,000 $15.50 $155
.82 25% $39
.21

La Pinta CDO 2 0,000 (MBbl) 100% 20,000 $15.50 $310 $1.65 25% $78
.41

La Pinta Tubara 5 ,000 (MBbl) 100% 5,000 $15.50 $78
.41 30% $23
.12

San Angel 1 50 (Bcf) 100% 150
.45 $68
.36 50% $34
.18

Turpial 1 0,000 (MBbl) 50% 5,000 $15.50 $78
.41 10% $8
.04

40,150 $688 $3.65 $181
.96

Unrisked Value Risked Value

The San Angel prospect is scheduled to be drilled in Q4 this year, which could have a material effect on the valuation. Shell drilled a well in 1943 that tested 8 MMcf/d, but was abandoned as gas had no value at the time. That old well increases the chance of success on the prospect substantially. We believe that these well results will be available prior to the conclusion of the strategic alternative process, and a success could increase the value substantially.

Peru

Peru – Realizable Values

Minimum Maximum

($MM) ($MM)

Block 106 $33.3 $92.3

Block 107/133 $50.0 $150.0

$83.3 $242.3

Petrolifera’s Peruvian assets are arguably the most valuable within the Company, but valuation poses a challenge in that it is all in the exploration potential. There is no production or reserves. The expected value of potential resources that may be discovered is not typically an indicator of market value. The work commitments on Block 107 were $16.4 million over 7 years1. Block 133, awarded in April 2009, added additional geological field studies but the additional costs are not material. The program on Block 106 was $25.6 million to be spent over seven years. We have considered, but rejected the use of these work commitments in valuing the Peruvian blocks. These contracts were negotiated in 2005, prior to the larger influx of other competitors in 2006, which pushed up work commitments and royalties payable. Petrolifera’s blocks are therefore more valuable than the general market.

Petrolifera has been seeking a farm-in partner for Blocks 107 and 133 for over a year. The Company is also initiating a similar process for Block 106, which is 1 Some of the time periods have been extended as the “clock” turns off while the Company is waiting for government approval of the Environmental Impact Assessments.

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The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

starting now, as the seismic processing and interpretation has only recently been completed. A typical format for such a farm-out has the prospective partner pay the costs for the first one or more wells, which in turn, earns them some working interest in the entire block. The partner may also reimburse the Company for some share of historical expenses. The size of the earned interest can vary significantly, but in general, the higher the cost of the well(s), the greater the interest.

The first well in Block 107/133 is likely to be very expensive – we believe it could be $35 million or more. The location is in the Andean jungle, requiring a heliportable drilling rig. Total depth could be 4,000 metres or more, and will likely have to be drilled as a deviated hole from an offset surface location. With costs of that magnitude, it is likely that the partner will take a majority interest and operatorship after earning. We believe the range of the earned interest would be between 60% and 80% (leaving 20% - 40% for Petrolifera) and that the earn-in would require between one and three wells. The more wells, the higher the earned interest.

In Block 106, drilling costs are likely to be in the $20 million range, as the target depths are 2,500 – 3,000 metres and will not likely have to be deviated. As the Corrientes field is located in the middle of the block, there is better well control available for the geological interpretation. We expect a slightly better range of terms, one to three wells earning between 50% and 75%.

The tables below show the range of values for each of the two blocks for various combinations of wells drilled and earned interests. The gray shaded areas are those combinations that we consider unlikely.

Block 106 Implied Value Matrix

65% 70% 75%

Earned Interest

Wells

Drilled

Block 107/133 Implied Value Matrix

## 60% 65% 70% 75% 80%

1 $58 $54 $50 $47 $44

2 $117 $108 $100 $93 $88

3 $175 $162 $150 $140 $131

Earned Interest

Wells

Drilled

Upside Potential

Gross

Reserves WI

WI

Resources Unit Value COS

($/Bbl or $/Mcf) ($MM) ($/sh) % ($MM) ($/sh)

Block 106 1 50,000 (MBbl) 100% 150,000 $9.50 $1,425 $7.56 10% $143
.76

Block 107/133 5 ,000 (Bcf) 100% 5,000
.70 $3,500 $18.58 10% $350 $1.86

Oil 5 0,000 (MBbl) 100% 50,000 $9.50 $475 $2.52 10% $48
.25

205,000 $5,400 $28.66 $540 $2.87

Unrisked Value Risked Value

8

The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a

member of SIPC.

Corporate Assets and Liabilities

The remainder of Petrolifera’s assets and liabilities are fairly easily valued:

($MM)

Working Capital: $14.8

Notes: $9.6

Corporate Debt: ($22.5)

Other: ($10.0)

Total: ($8.1)

• The Notes are securities issued in lieu of Petrolifera’s former ABCP holdings. The Company has calculated an expected value of $19.2 million, but as no significant market has emerged for them, it is unlikely that a purchaser will be willing to pay that full value, and we have discounted them by 50%.

• The corporate debt is secured solely against the Notes. We have included it at full face value, although there is a potential gain of nearly $13 million (the $22.5 million of face value vs. the $9.6 million estimated value of the Notes) in the event of forced liquidation.

• Other costs of $10 million include allowances for investment banking fees associated with the strategic alternatives process, severance costs, lease obligations and any enduring G&A costs.

Valuation

Our sum of the parts valuation produced a range of potential values between $1.00 and $2.19 per share. We believe we have been suitably conservative at the low end of that range and that the ultimate realizable value will exceed that. At the high end, there is a chance that a purchaser(s) might pay full value, but we think it highly unlikely. We have therefore opted to leave our target unchanged at $1.20 per share and maintain our recommendation of SPECULATIVE BUY.

There is an alternate hypothesis that a potential buyer could offer only a takeover premium to the current market price of .65. Such a premium typically ranges between 20% and 40%, which might value Petrolifera between.78 and .91 per share. Our valuation range implicitly relies on the value of a competitive process to maximize value.

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The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

Value Shares NAV/sh

Oil & Gas Assets (C$MM) (MM) (C$/sh)

Engineering Report Value (2) $172.1

Reserve Value Adjustment (3) ($18.3)

Reserve Additions (4) $42.4

Land Value $30.7

Abandonment Liabilities ($6.4)

$220.5

Financial Assets & Liabilities

Working Capital $14.8

Long Term Investments (4) $9.6

Long Term Debt ($41.9)

G&A (31.3)

($48.7)

Net Asset Value (basic) $171.8 145.5 $1.18

Proceeds/Shares from Options $7.0 7.2

Net Asset Value (FD) $178.8 152.6 $1.17

Risked Exploration Prospects

To Be Drilled within 12 Months (5) $138.9

Deduct Land Value ($5.9)

Proceeds/Shares from Options $42.4 34.6

Risked 12 Month NAV $354.2 187.2 $1.89

Remaining Prospects (4) $349.4

Deduct Land Value ($24.8)

Proceeds/Shares from Options $3.6 1.2

ExNAV (FD) $682.4 188.4 $3.62

30-Sep-10

Petrolifera Net Asset Value

Petrolifera Net Asset Value – Going Concern Value 1

(1) Assumes that the Company continues as a going concern and retains all assets. Specifically, it assumes that the Peruvian blocks will be farmed out on a 100% to retain 25% basis, and that the La Pinta CDO and San Angel prospects in Colombia are farmed out on a 110% to retain 50% basis.

(2) PV13, after tax.

(3) Adjustments include JCI commodity price forecast and deduction of YTD production.

(4) JCI estimate for the value of the Brillante discovery in Colombia.

(5) We have valued the long-term investments (ABCP) at 50% of their balance sheet value.

10

The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a

member of SIPC.

Production, Cash Flow and Earnings Forecast – Going Concern Basis

Production

(Bbl/d) 3,356 3,306 2,972 2,590

(Mcf/d) 3,267 2,977 3,225 2,974

(BOE/d) 3,900 3,802 3,510 3,086

Commodity Prices

Oil (WTI) (US$/Bbl) 76.43 75.00 79.00 79.00

Wellhead (C$/Bbl) 50.89 45.48 50.63 50.26

Gas (C$/Mcf) 2.53 2.46 2.48 2.46

($/BOE) ($/BOE) ($/BOE) ($/BOE)

Revenue (M$) $65,315 $45.88 $63,845 $46.00 $57,765 $45.09 $64,207 $57.01

Interest Income (M$) 261 40 13 4

$65,575 $63,886 $57,778 $64,211

Royalties (M$) (9,315) ($6.54) (9,063) ($6.53) (8,271) ($6.46) ( 7,354) ($6.53)

Operating Cost (M$) (19,656) ($13.81) (19,124) ($13.78) (17,383) ($13.57) ( 15,448) ($13.72)

G&A (M$) (7,274) ($5.11) (7,369) ($5.31) (7,462) ($5.82) ( 7,518) ($6.68)

Interest (M$) (3,913) (3,435) (2,975) ( 2,732)

F/X (M$) (802) - - -

DD&A (M$) (29,734) ($20.89) (29,509) ($21.26) (23,355) ($18.23) ( 20,718) ($18.40)

Stock Compensation (M$) (4,017) (2,700) (4,097) ( 2,754)

Other (M$) (1,987) (2,284) (2,284) ( 2,284)

(76,699) ($73,484) (65,828) ($58,807)

Tax

Current (M$) (946) - (0) -

Future (M$) (1,350) - (0) -

(M$) ($2,296)
(
)

Earnings (C$M) ($13,420) ($9,599) ($8,049) $5,404

(C$/sh, FD) (0.06) (0.07) (0.06) ( 0.05)

Field Netbacks (M$) $36,343 $25.53 $35,659 $25.69 $32,111 $25.07 $41,405 $36.76

Cash Flow (C$M) $23,107 $22,611 $19,403 $16,003

(C$/sh, FD)
.17
.16
.13
.11

DACF (C$M) $27,020 $26,046 $22,379 $18,735

(C$/sh, FD)
.20
.18
.15
.13

Capital Expenditures (M$) $49,000 $15,000 (1)

LT Debt (2) (M$) 42,984 $37,980 25,383 $22,496

Working Capital $6,395 $4,267 ($9,948) ($11,413)

Net Debt $36,590 $33,713 15,435 $11,083

Cal. 2010 Exit 2010 Cal. 2011 Exit 2011

(1) JCI estimate, subject to revision. Key variables will include the farm-out terms in Colombia and Peru.

(2) Average for period except exit values.

11

The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities. Member – CIPF. Jennings Capital (USA) Inc. is a member of SIPC.

Sensitivity Tables – Going Concern Basis

2010 Cash Flow from Operations ($K)

1.00 1.50 2.00 2.50 3.27 3.50 4.00 4.50 5.00

2,750 $18,515 $18,829 $19,143 $19,456 $19,939 $20,084 $20,398 $20,711 $21,025

3,000 $19,822 $20,135 $20,449 $20,763 $21,246 $21,390 $21,704 $22,018 $22,332

3,356 $21,682 $21,996 $22,310 $22,623 $23,107 $23,251 $23,565 $23,878 $24,192

3,500 $22,435 $22,748 $23,062 $23,376 $23,859 $24,003 $24,317 $24,631 $24,945

3,750 $23,741 $24,055 $24,369 $24,682 $25,166 $25,310 $25,624 $25,937 $26,251

2010 Operating Cash Flow per Share

1.00 1.50 2.00 2.50 3.27 3.50 4.00 4.50 5.00

2,750
.14
.14
.14
.14
.15
.15
.15
.15
.15

3,000
.15
.15
.15
.15
.16
.16
.16
.16
.16

3,356
.16
.16
.16
.16
.17
.17
.17
.17
.18

3,500
.16
.17
.17
.17
.17
.17
.18
.18
.18

3,750
.17
.17
.18
.18
.18
.18
.19
.19
.19

2011 Cash Flow from Operations ($K)

1.00 1.50 2.00 2.50 3.22 3.50 4.00 4.50 5.00

2,500 $13,378 $13,624 $13,870 $14,116 $14,470 $14,608 $14,854 $15,100 $15,346

2,750 $15,957 $16,219 $16,482 $16,729 $17,083 $17,221 $17,467 $17,713 $17,959

2,972 $18,192 $18,478 $18,757 $19,025 $19,403 $19,541 $19,787 $20,033 $20,279

3,250 $20,923 $21,235 $21,537 $21,833 $22,244 $22,400 $22,669 $22,932 $23,185

3,500 $23,350 $23,663 $23,976 $24,289 $24,735 $24,901 $25,198 $25,481 $25,761

2011 Operating Cash Flow per Share

1.00 1.50 2.00 2.50 3.22 3.50 4.00 4.50 5.00

2,500
.09
.09
.10
.10
.10
.10
.10
.10
.11

2,750
.11
.11
.11
.11
.12
.12
.12
.12
.12

2,972
.13
.13
.13
.13
.13
.13
.14
.14
.14

3,250
.14
.15
.15
.15
.15
.15
.16
.16
.16

3,500
.16
.16
.16
.17
.17
.17
.17
.18
.18

FY 2011 Gas Production (MMcf/d)

FY 2010 Gas Production (MMcf/d)

FY 2010 Oil

Production

(Bbl/d)

FY 2011 Oil

Production

(Bbl/d)

FY 2011 Gas Production (MMcf/d)

FY 2011 Oil

Production

(Bbl/d)

FY 2010 Gas Production (MMcf/d)

FY 2010 Oil

Production

(Bbl/d)

12

Jennings Capital Inc. Research Disclosures

Company Ticker

Petrolifera Petroleum Limited TSX-PDP

I, Gregory Chornoboy, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.

Note: We initiated coverage on Petrolifera Petroleum Limited on January 30, 2006 with a BUY recommendation and a 12-month target of C$17.25.

The Share price at the time was C$12.35. On May 16, 2006, we reduced our target to C$14.55, while maintaining our BUY recommendation. Share price was C$9.74. On August 3, 2006, we increased our 12-month target to C$19.15 with a BUY recommendation. The share price was C$14.45. On August 18, 2006, we increased our 12-month target to C$20.20. Share price was C$17.67. On October 19, 2006, we increased our target to C$30.50.

Share price at the time was C$23.70. On December 6, 2006, we decreased our target to C$25.50 but upgraded to a STRONG BUY recommendation.

Share price at the time was C$16.90. On March 6, 2007 we downgraded our recommendation to BUY and decreased our target price to C$22.00. We also introduced an ABOVE AVERAGE risk rating due to additions to our rating system. Share price at that time was C$16.43. On June 11, 2007 we upgraded our recommendation to STRONG BUY and increased our target price to C$26.75. Share price at that time was C$16.91. On August 10, 2007 we decreased our recommendation to BUY and reduced our target to C$22.00. Share price at that time was C$16.47. On November 22, 2007 we decreased our target price to C$17.40. Share price at that time was C$10.38. On March 18, 2008 we reduced our target price to C$16.50. Share price at that time was C$11.00. On May 9, 2008 we reduced our target price to C$15.25. Share price at that time was C$9.50. On June 11, 2008 we increased our target price to C$17.15. Share price at that time was C$9.39. On August 12, 2008 we decreased our target price to C$14.50. Share price at that time was C$5.49. On December 2, 2008 we reduced our target price to $5.00. Share price at that time was C$1.58. On January 14, 2009 we reduced our target price to C$3.75. Share price at that time was C$1.15. On March 3, 2009 we reduced our target price to C$3.00. Share price at that time was C
.97. On March 16, 2009 we decreased our target price to C$2.50. Share price at that time was C$1.07. On April 14, 2009, in our Oil and Gas Sector Valuation Update, we increased our target price to C$2.75. Share price at that time was C$1.88. In our Sector Valuation Update dated July 6, 2009 we increased our target price to $3.25. Share price at that time was C$2.79. On July 28, 2009 we changed our recommendation to SPECULATIVE BUY and reduced our target price to C$2.75. Share price at that time was C$1.56. On August 10, 2009 we reduced our target price to C$1.75. Share price that time was C$1.44. On September 17, 2009 we decreased our target price to C$1.35. Share price at that time was C .97. On

March 1, 2010 we decreased our target price to C$1.20. Share price at that time was C .95. On April 21, 2010 we increased our target price to C$1.40. Share price at that time was C .93. On August 9, 2010 we decreased our target price to C$1.20. Share price at that time was C
.58.

U.S. Client Disclosures

This research report was prepared by Jennings Capital Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund and a Participating Organization of the Toronto Stock Exchange and the TSX Venture Exchange. Jennings Capital Inc. is an affiliate of Jennings Capital (USA) Inc. Jennings Capital (USA) Inc. accepts responsibility for the contents of this research report, subject to the terms and limitations as set out above. Jennings Capital (USA) Inc. is a registered broker-dealer with the Securities and Exchange Commission and a member of the National Association of Securities Dealers Inc.

THE FIRM THAT PREPARED THIS REPORT MAY NOT BE SUBJECT TO U.S. RULES WITH REGARD TO THE PREPARATION OF RESEARCH

REPORTS AND THE INDEPENDENCE OF ANALYSTS.

This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Any transaction in these securities by U.S. persons must be effected through either Westminster Securities Corporation, a U.S. broker-dealer registered with the Securities and Exchange Commission and a member of the National Association of Securities Dealers Inc. and the New York Stock Exchange Inc. or through Jennings Capital (USA) Inc., A U.S. broker-dealer registered with the Securities and Exchange Commission and a member of the National Association of Securities Dealers Inc.