Petrolifera Issues Activity Update

Petrolifera Petroleum Limited announced Tuesday that its current Light-gravity crude oil production from the Puesto Morales/Rinconada Concession in the Neuquén Basin, Argentina is approximately 6,500-7,000 bbl/d, primarily from its 1002, 1003, 1010, and 1011 wells drilled in late 2005 and early 2006.

The company has now identified up to 54 Sierras Blancas/Punta Rosada locations for drilling on the two blocks that comprise its 95,000-acre concession. Of these, 22 wells are considered firm locations to be drilled over the ensuing 6- month period commencing in August 2006, with the balance of 32 wells contingent upon the outcome of the firm locations. If warranted, these additional wells would be scheduled for drilling within the ensuing 6-month period ending August 31, 2007, with the two rigs that are scheduled to be available to Petrolifera under long-term renewable contracts with two separate contractors.

Included in the designated firm locations are two Sierras Blancas tests on the Rinconada block. Accordingly, during the next 12 months Petrolifera will now focus its drilling activity on developing the more prolific Sierras Blancas and Punta Rosada Formations and will defer drilling additional Quintuco development wells for crude oil until the program to develop the superior reservoirs is completed.

The first rig, originally scheduled to be available to Petrolifera in late June or early July 2006, is now scheduled to arrive on location in early August 2006. The delay resulted from a decision by another oil company that had the drilling rig under contract to conduct additional drilling prior to releasing it for usage by Petrolifera.

The second rig, which is one of 20 new rigs being imported into Argentina, is scheduled to be available to Petrolifera on or about October 1, 2006--timed to the target completion date of the company’s new production facilities and pipeline. This program appears to be on schedule at this time and Petrolifera expects to have significant additional productive capacity available to tie into the pipeline by October 2006. In the intervening period, temporary storage facilities would be installed at new successful wells and the production trucked to third-party treatment plants until the new pipeline becomes operative. This alternative would continue to be available to handle any short-term surplus productive capacity after the company’s new treatment plant and pipeline are operative, leaving Petrolifera with operational flexibility as the eventual productive capacity of the concession is established through drilling.

Petrolifera is also examining the economics of proceeding with the development of its nonassociated Quintuco natural gas reserves, to be produced in conjunction with the associated volumes that are produced with the light-gravity crude oil from the Sierras Blancas and Punta Rosada formations. Larger natural gas reserve and production volumes are expected to attract better pricing from industrial buyers than those which are presently available to Petrolifera, due to the restricted volumes currently being produced from the Puesto Morales block. This project, along with modifications to the company’s overall financial plan and budget, will be evaluated by the company and its board at Petrolifera’s next regularly scheduled Board meeting.

As indicated, preliminary estimates suggest it would take approximately 1 year from August 2006 for the firm and contingent drilling program of 54 wells to be completed on the concession. During this timeframe the company’s upgraded crude oil production facilities and pipeline will be completed and operational and the proposed natural gas development program could be substantially advanced or completed, but would likely require additional continued drilling activity to develop the recognized and potentially considerable non-associated natural gas reserves in the Quintuco Formation.

Petrolifera is also planning to shoot additional 3D seismic for additional coverage over those portions of the Puesto Morales and Rinconada blocks that have not yet been subjected to modern geophysics. This program will also likely occur later this year if suitable geophysical crews can be identified and contracted. As a result of the identification and restructuring of the company’s proposed 2006-2007 drilling program on the Puesto Morales and Rinconada blocks, it is likely Petrolifera’s financial plan and capital budget for the full year 2006 will be expanded to accommodate the anticipated activity between now and yearend. Accordingly, revised guidance will be provided to shareholders along with the company’s second quarter and first half financial and operating results, scheduled for release on August 8, 2006.

Petrolifera is a Calgary-based oil and natural gas company focused on South America with 100-percent-owned and operated properties in Argentina and Peru.

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