Petrolifera Makes Headway in Puesto Morales Norte Field

Petrolifera has completed drilling and testing five infill wells within the Puesto Morales Norte Field in the Neuquén Basin, Argentina. Three of the wells (PMN-1108, PMN-1110 and PMN-1111) are situated within the southern lobe of the field with the best well (PMN-1108) having produced during its first month of production at an average rate of 520 bbl/d of light gravity crude oil, with only a two percent water cut.

The PMN-1111 well came onstream at an approximate rate of 500 bbl/d of fluid with a 60 percent oil cut and a 40 percent water cut, for net production of 300 bbl/d. Initial onstream test rates at the PMN-1110 well were more modest, at rates of 200 bbl/d of fluid with an 80 percent water cut, resulting in about 40 bbl/d of crude oil. Petrolifera believes this rate can be improved with adjustments to and optimization of the pumping system.

The other two wells, PMN-1109 and PMN-1112, are located in the northern part of the field. The PMN-1109 well averaged 160 bbl/d of crude oil production during its first month onstream and the oil rate has recently improved to a rate of 300 bbl/d, albeit with a high 87 percent water cut. The PMN-1112 well averaged 1,000 bbl/d of fluid with a high 88 percent water cut, resulting in crude oil production averaging 120 bbl/d. The fluid rate has since declined but the oil rate has remained steady.

All of the drilled wells encountered some pressure depletion relative to the field's original reservoir pressure, as expected. Nevertheless, the results, which indicate a total tested or onstream initial productivity of approximately 1,100 bbl/d of crude oil, underscore the excellent nature of the Sierras Blancas reservoir at Puesto Morales Norte. Initial productivity and test rates are not necessarily indicative of the sustainable productivity of the five wells drilled and completed in this infill drilling program. The full impact and sustainable productivity of the wells will be determined after modifications to the water treatment and water handling facilities are completed at the field. This is expected to occur during the first quarter 2010. As a result, overall field productivity may have to be constrained for a short period of time, until the total incremental fluid volumes comprised of crude oil and water can be accommodated at the plant.

Because the preliminary results of the initial five well drilling program indicate very favorable economic returns for Petrolifera, consideration will be given to drilling an additional four wells within the Puesto Morales Norte Field in 2010. The capital costs associated with these additional drilling opportunities were not included in Petrolifera's previously announced 2010 capital budget, nor has the company decided whether or when to proceed with the expanded program.

Petrolifera's current Argentinean sales are approximately 4,730 boe/d and partially reflect the impact of these results.

At Vaca Mahuida, Petrolifera (75 percent) and its joint venture partner (25 percent) have recently drilled, logged and cased for testing the VM.x-2014 exploratory well on the Vaca Mahuida license, situated southeast of Puesto Morales. The well encountered a number of zones of interest, including some oil shows in side wall cores and testing will occur upon arrival of a service rig.