Pearl to Sell Gulf Assets for Kit Shares

Pearl Exploration and Production Ltd. said that the Company has entered into a letter of intent with Kit Resources Ltd. pursuant to which Pearl will transfer all of its Gulf of Mexico assets to Kit in exchange for 10 million shares of Kit, each Kit share having a deemed value of $1.20.

The Gulf of Mexico assets to be transferred are comprised of Pearl's 100% working interest in five Gulf of Mexico offshore blocks, farm-in rights to acquire a 25% working interest in a sixth offshore block, and all physical data, work products and files and records associated with these blocks. Closing of the transaction is subject to completion by Kit, expected in early February, 2007, of a satisfactory due diligence review of the Gulf of Mexico assets, and all requisite regulatory approvals.

"This transaction will allow Pearl to continue to participate in high potential, shallow water natural gas exploration in the Gulf of Mexico through an equity ownership in Kit" advised Gary Guidry, President of Pearl. "It also relieves Pearl of any budget obligations for exploration or development in respect of these assets. As previously announced, 90% of the Pearl 2007 budget will be directed at near term cash flow and production development projects primarily located in Western Canada. In addition, 10% of the 2007 capital program will be directed at high potential exploration and exploitation opportunities, primarily located in Western Canada and Texas, which will have a significant impact if successful."

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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