Pyramid Signs Option to Double Production, Reserves

Pyramid Petroleum Inc. on Wednesday announced that it has entered into an Option Agreement to purchase a 20 percent non-operated interest in a planned acquisition of certain oil and gas properties in the Gulf of Mexico. The purchase would complement Pyramid's current production of approximately 170 boe/d in the Gulf of Mexico and would consolidate and increase the Company's reserve base in that region.

If Pyramid exercises its option as expected, the Company's production would more than double, increasing to approximately 665 barrels of oil equivalent per day ("boe/d") from current production of approximately 325 boe/d. In addition, the planned acquisition has substantial potential to increase production by completing behind-pipe non-producing horizons. The purchase would also increase Pyramid's proved and probable reserves to approximately 2.71 million barrels oil equivalent ("MMboe"), adding proved and probable reserves net to Pyramid of 1.38 MMboe, consisting of 0.49 MMboe proved and 0.89 MMboe probable, calculated by independent engineers as of September 1, 2006.

The planned acquisition is a varying working interest, ranging from 5 percent to 20 percent, in 12 producing and 40 non-producing wells in the Gulf of Mexico. Pyramid's 20 percent interest in the production would be approximately 340 barrels of oil equivalent per day, consisting of 200 barrels of oil per day ("bbls/d") and 850 thousand cubic feet of gas per day ("Mcf/d"). Pyramid's 20 percent share of the contracted purchase price would be US$7 million. Pyramid plans to finance the acquisition with production credits of approximately US$2.8 million, debt of US$3 million and a cash payment of approximately US$1.2 million.

Pyramid Petroleum is an oil and gas exploration and production company based in Calgary, Alberta. The Company's focus is on development of domestic and international hydrocarbon projects. Pyramid has non-operated working interests in producing properties located in Alberta, Montana and the Gulf of Mexico. The combined production net to Pyramid from these properties is currently approximately 325 barrels of oil equivalent per day ("boe/d").