Pearl Announces Second Quarter Results

Pearl Exploration and Production Ltd. (TSX VENTURE:PXX) announces the results of an active second quarter period ended March 31, 2006 in which it advanced its opportunities and acquired additional oil and gas interests, and received its first oil and gas revenues totaling $397,000.

Gary Guidry, President of Pearl, commented, "Pearl, the newest Lundin Group oil and gas company, is now off and running and focused on North America. The healthy cash flow, the exciting development and exploration programs already well underway, and the continual search for new opportunities that complement our existing assets will all contribute to the strong, paced growth that we target. We look forward to sustained growth in the months ahead."

Highlights of the quarter include:

The Company added to its existing portfolio of North American oil and gas interests with the acquisition of US assets from Valkyries Petroleum Corp. This acquisition was comprised of:

- a Gulf of Mexico offshore oil and gas exploration block referred to as Mustang Island;

- various leasehold and royalty interests in California (including Topanga, which is an oil exploration opportunity), Texas and Louisiana. Producing wells in the Texas Queen City trend have added gas and natural gas liquids production to the Company's revenue stream of approximately 120 barrels of oil equivalent per day ("boepd"); and

- an exclusive contract with an oil and gas prospect generation company specializing in Gulf Coast, Gulf of Mexico and California oil and gas exploration.

Further to the closing of the Valkyries transaction, the Company:

- began an appraisal drilling program at Topanga for up to three wells. Based on encouraging results from the appraisal program, the Company has committed to the full three well program;

- successfully negotiated a farm out agreement of 40% of the 100+ BCF natural gas exploration prospect at Mustang Island with a third party. Drilling of the first exploratory well is expected to occur in July 2006; and

- participated in the most recent Gulf of Mexico land sale and was granted four additional leases with material oil and gas exploration prospects defined by 3D seismic.

The Company is also pleased to report that development activities are now well underway for the San Miguel heavy oil project. The pilot facilities installation is nearing completion, regulatory approval has been granted for the pilot test and the injection of steam is expected to begin in early June 2006.

At Palo Duro, the Company's working interest was reduced from 45% to 30% as the vendor exercised its back-in right for a 15% working interest. Four exploratory wells have been proposed by the operator and the drilling program is expected to be underway by July 2006. In addition to the Lower Pennsylvania shale gas play, we expect to be testing several secondary oil objectives with the four planned wells.

On April 28, 2006 the Company closed the previously announced plan of arrangement with Pan Global Energy. Planning is underway to kick off a summer drilling program at the Onion Lake heavy oil field. The Pan-Global acquisition has added approximately 320 boepd additional current production.

On May 15, 2006, the Company advised SignalEnergy Inc. ("Signal") shareholders that it would be mailing an offer to acquire all the outstanding shares of the company. The acquisition of Signal would complement the Company's existing portfolio of North American opportunities and add up to $64 million in cash to our balance sheet. Although the Board of Signal Energy recommended to its shareholders not to accept our offer, our offer remains open for acceptance until June 21, 2006.

Also in May, the Company completed a private placement of 7 million common shares at a price of $6.00 per share for gross proceeds of up to $42 million. With the completion of this equity offering, the Company is well-positioned to continue adding North American oil and gas opportunities to its portfolio, and to meet its exploration and development commitments.

Pearl is a public company focused on delivering disciplined growth by establishing a North American portfolio of oil and gas projects with an emphasis on large resource opportunities.


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