Petrolifera: Three Rigs in Argentina; Expecting Fourth

Petrolifera Petroleum Limited has three rigs drilling new wells in Argentina and, as advised by the company's drilling contractor, Quintana Drilling, a fourth rig is scheduled to finally arrive in Buenos Aires, Argentina from China on July 9, 2007. A second service rig, presently in Argentina, has also recently been contracted by the company.

Presently, the company is using Quintana Rig No. 6 to drill the PMOx-1001 well, at a location situated on the southern half of the Puesto Morales Block, which in turn comprises part of the Puesto Morales/Rinconada Concession in the Neuquen Basin, Argentina. This well is a Jurassic test and is located southwest of the Puesto Morales Sur field on a structure defined by interpretation of the company's 3D seismic program, which was acquired in late 2006.

The Quintana Rig No. 3 is currently drilling the RN a-1003 well, a southerly offset to the RNx-1001 Sierras Blancas discovery, which flowed light gravity oil to surface from the Sierras Blancas Formation at shallow depths with a test rate of 690 bbl/d in June, 2007. Subsequent to the drilling of the 1001 well, Petrolifera reentered and on test recovered crude oil from the RN.RRx-6 well, which had been suspended for over thirty years. Given the duration of the well's shut-in period and its geological characteristics, it was determined a frac would be needed to assist well productivity. Although the recovery of oil, results of pressure tests and subsequent analysis thereof collectively were most encouraging, it was considered prudent to defer this program and to proceed with the conversion of Rig No. 3 back to drilling status to enable modern wells to be drilled and completed with a separate completion rig. This conversion was done and accordingly new drilling at the 1003 location is proceeding. Numerous locations to follow up the 1001 discovery well have been selected or are being prepared and continuous utilization of Rig No. 3 to drill new wells on the Rinconada Block and eventually on the adjoining Vaca Mahuida Block is anticipated.

Recently, Petrolifera was successful in securing a third rig from one of its business associates active in the general region. It is expected this rig will be available to Petrolifera for the ensuing three or four month window and it is currently on location and drilling ahead at PMN a-1022, a well situated on the central Puesto Morales North culmination just southwest of the original PMN 1002 discovery well and northwest of the prolific 1013 well, which had tested approximately 6,000 bbl/d of light gravity crude oil when it was drilled and was placed onstream at a tubing-constrained rate of approximately 3,000 bbl/d of light gravity crude oil. This is a development location.

The company's originally contracted service rig has just completed a testing program at the PMN x-1028 stepout well, situated on the eastern extremity of the Puesto Morales Block. Results of this well are being held confidential for competitive reasons and will be disclosed in due course. Petrolifera will be a participant in the upcoming round of bidding for new acreage in Rio Negro Province, Argentina.

This originally contracted service rig is now on location at the PMN 1013 well to address the water incursion issue which had arisen at the time of our last press release on June 5, 2007. Efforts are being made to isolate the source of the water flow, which is believed to be coming from the lowermost portion of the main oil-bearing zone in the well. A sand pack and a bridge plug have been set in the well and the upper portion of the Sierras Blancas zone remains open from the previously perforated interval. The well is being swabbed in for production and if limited or no water is indicated, the well, being Petrolifera's most prolific well to date, will be produced as before. If water encroachment cannot be controlled or eliminated, production will be curtailed to recent levels until the company's waterflood becomes operational later this year and high-volume submersible pumps are available for installation in the well to handle high fluid levels.

Petrolifera has had a challenging second quarter, with production and sales curtailments to below 7,000 boe/d on various occasions during the aforementioned period. These reduced levels of sales were due to periodic inventory buildup; the previously-announced elective curtailments due to high gas/oil ratios on the northern lobe of Puesto Morales North pending the activation of the planned pressure maintenance scheme (waterflood); water incursion at 1013; delays in finalizing facilities; delays in pump deliveries and installations; minor delays in securing its contracted rigs on a timely basis; and the transition associated with the assumption of direct field operatorship by the company's staff. While this diminution of sales volumes is considered temporary, it is anticipated it will culminate in reduced operational and financial results for the second quarter 2007 as compared to the first quarter of 2007, although first half 2007 results are anticipated to far outstrip first half 2006 results. Furthermore, at this juncture the company continues to remain constructive about achieving its full year 2007 guidance as provided last October and reaffirmed in our last release. This contemplates a December exit production rate approaching 21,000 boe/d. With four drilling rigs available, anticipated drilling of new plays and previously unevaluated structures over the next several months and the availability of a second service rig to assist in bringing on new productivity if new discoveries continue to be made, the company has a reasonable basis for its optimism. Also, with the impending completion of the company's treatment plant, waterflood and water handling facilities and near-term activation of Petrolifera's high pressure natural gas pipeline to Medanito, the company remains optimistic it can complete its anticipated 55 well program in Argentina and thus substantially realize its 2007 goals and objectives. This would establish the basis for an acceleration of drilling activity again in 2008. This is buttressed by the fact that since it embarked on its Argentinean drilling program in late 2005, Petrolifera has not drilled a dry hole on the Puesto Morales/Rinconada Concession.

In the near term, Petrolifera anticipates evaluating other new play concepts and drilling remaining infill and stepout wells in the northern part of Puesto Morales Block, fortified by recent excellent results. Also, new Sierras Blancas structures on the southern portion of the Puesto Morales Block remain to be evaluated. The company anticipates accelerating its continuous and aggressive follow-up drilling on the southern portion of the Rinconada Block and will eventually evaluate seismically defined undrilled structures on the northern portion of Rinconada. With its extensive acreage position in the region of its original Puesto Morales and Rinconada Blocks and with tenders for new blocks being submitted to authorities later this month, the company remains committed to Argentina in a meaningful way with a planned 2007 capital budget exceeding $110 million. Petrolifera is fortunate to be in the enviable position of having a large, untapped inventory of infill, stepout and exploratory opportunities for the next several years in Argentina, as well as its meaningful prospective holdings and opportunities in both Colombia and Peru.

Petrolifera Petroleum Limited is a Calgary-based crude oil and natural gas exploration, development and production company with its main producing properties in the Neuquen Basin, Argentina. The company also holds a 100 percent working interest in extensive and prospective acreage blocks in Peru and Colombia, where drilling is anticipated in 2008. The company's shares are listed for trading on the Toronto Stock Exchange under the symbol PDP, with a current market value exceeding $850 million. Connacher Oil and Gas Limited owns a 26 percent equity interest in Petrolifera Petroleum.