Petro-Reef Encouraged by Drilling Results

Petro-Reef Resources, Ltd., a junior oil and gas company operating in Alberta, has completed a successful five-well drilling program offsetting its October 2005 natural gas discovery in Alexander Alberta. Based on the results following the May 9, 2006 press release, the company drilled an additional well and re-entered another well in May and is in the process of licensing an additional six wells to be drilled or re-entered in the next 2 to 6 weeks.

The October 2005 natural gas discovery at 12-28 has continued to produce at approximately 4.18 million cubic feet of natural gas per day (697 barrels of oil equivalent per day) since it was put on production in December 2005. The company's interest in the well is 84% (585 BOE/d) until revenue from the well reaches 400% of drilling and completion costs plus 200% of equipping and tie-in costs. Petro-Reef's interest then reverts to 34%. Based on current production levels and commodity prices, this reversion is anticipated to occur in August 2006. The 12-28 is the only well in Petro-Reef's 2006 drilling program that features a working interest agreement of this kind.

The first well offsetting the 12-28 natural gas discovery was drilled about two kilometers north at 12-33. The company set production casing and has completed the same zone as 12-28 with an initial flowing production test of 525 Mcf/d and a crude oil rate of 48 b/d. Petro-Reef has 54% interest in the well. Net to Petro-Reef is 73 BOE/d.

The second well in the five-well program was a re-entry at 6-1. The production casing was perforated and fracture stimulated. The well was placed on production May 2, 2006, and is producing crude oil at a rate of 38 b/d with 80 Mcf/d of natural gas. Petro-Reef has a 44% interest in the well. Net to Petro-Reef is 22 BOE/d.

The third well in the program was drilled at 5-31. The company has identified a pay zone with 123 feet of gross natural gas and crude oil pay. The well was perforated and fractured in the oil zone and was placed onstream as a flowing oil well on May 19, 2006. After three weeks of production the well is flowing at 42 barrels of crude oil per day with 592 Mcf/d of natural gas. Petro-Reef has a 64% interest in the well. Net to Petro-Reef is 90 BOE/d.

The fourth well was drilled at 13-21. As announced on May 9, 2006, the well was deemed to be uneconomic and has been abandoned.

The fifth well was drilled at 11-27, 2 kilometers east of the discovery at 12-28. Based on well logs, Petro-Reef has identified four potential crude oil and/or natural gas zones. The zone that is producing at 12-28 was drill stem tested at 11-27 with a maximum wellhead absolute open flow (AOF) potential rate of 7.312 MMcf/d.

A second zone up-hole in the wellbore was drill stem tested with a maximum wellhead AOF potential rate of 2.464 MMcf/d. The combined AOF for the two zones was 9.776 MMcf/d (1,620 BOE/d). Petro-Reef has a 54% interest in the well. A production test will be conducted in the next two weeks to determine the production rate.

Both the first well at 12-33 and the fifth well at 11-27 are anticipated to be placed on stream by August 1, 2006. The other two successful wells have been placed on stream.

After the initial five-well drilling program Petro-Reef drilled an additional well at 1-31 and re-entered a well at 10-33. Both wells have been cased and will be production tested in the next two to three weeks.

Rig availability-permitting, the company expects to drill up to 25 wells (11.94 net) in 2006, including the wells that have been drilled to date and the six wells that will be licensed for drilling in the next 2 to 6 weeks


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