Petrolifera Petroleum Limited reports significant new field confirmation well on its Rinconada block in Argentina; Confirms continued drilling success at Puesto Morales; Provides Argentina update



    CALGARY, June 5 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX)
announced today that it has drilled a significant new field confirmation well
on its Rinconada Block which comprises a portion of its Puesto
Morales/Rinconada Concession onshore in the Neuquén Basin, Argentina. The
well, RN.RR.x-1001, was drilled to a depth of just over 1,000 meters and on
test flowed light gravity crude oil through a 16 millimeter choke at a
stabilized rate of 690 bbl/d from the Sierras Blancas Formation. Petrolifera
has labeled the well a new field confirmation well, as the region was modestly
productive for a short period of time during the early 1970's when it was
owned by another operator, although none of the historical wells experienced
productivity anywhere near that recorded in Petrolifera's first well on the
Block. The 1001 well is the twentieth consecutive successful well drilled by
the company since it commenced drilling on the Concession in late 2005.
    Based on recently developed geological models and interpretation of new
3D seismic acquired by Petrolifera in late 2006, the 1001 well is situated on
what appears to be a significant stratigraphic/structural feature with
substantial aerial extent approaching up to 90 square kilometers. The well is
a step out to the RN.RR.x-6 well, drilled in 1969 by the former state oil
company of Argentina, which was suspended while still producing crude oil at
low rates. If possible, Petrolifera intends to reenter this well to attempt a
recompletion of the old well, using the Quintana No. 3 rig which is both a
drilling and completion rig. Thereafter, the company intends to pursue an
aggressive drilling program to develop the new field on initial spacing of
approximately 160 acres, based on the high productivity experienced in the
1001 well from adequately thick pay at shallow depths. If warranted in the
future and depending upon the extent of the target reservoir and the quality
thereof, downspacing to approximately 80 acres would be considered.
    The 1001 well is important to Petrolifera in establishing a new field for
the company. It is situated approximately 20-25 kilometers to the east of the
Puesto Morales Block. The success also raises Petrolifera's expectations for
its recently-acquired Vaca Mahuida Block which is contiguous with the
Rinconada block to the south and east, also in Rio Negro Province, Argentina.
As Petrolifera expects to have four rigs working on the Puesto Morales and
Rinconada Blocks this summer, including the two it presently has on location,
one more from the local market and one more (Quintana No.13) now anticipated
to be operative by August 2007, an active drilling program is anticipated with
a continuing objective of drilling 55 wells (including water injection wells
on Puesto Morales) in Argentina during 2007. Also, negotiations are advancing
to secure additional completion rigs to keep pace with the drilling program.
    This new drilling will not only add new productivity with attractive
economics, but is expected to contribute significantly to the company's
Argentina reserve base, which will be evaluated after year end 2007 in
conjunction with the preparation of year-end audited financial statements to
be released in March 2008.
    The Rinconada Block is the larger of two blocks which comprise the
95,000 acre Puesto Morales/Rinconada Concession in the Neuquén Basin,
Argentina. It is bisected by a reservoir created as a result of a
hydroelectric dam on the Rio Colorado east of the area. A 3D seismic program
was completed in late 2006 over the entire land mass which comprises the
northern and southern portion of the Block and other prospects have been
identified for drilling in the next year.

    Puesto Morales

    At Puesto Morales, Petrolifera recently drilled and tested the 1027 well,
situated south of the 1004 well and west of the recently-drilled 1056 well, at
rates of up to 2,380 bbl/d of light gravity crude oil with no water through an
18 millimeter choke from the Sierras Blancas Formation. The well will be
completed and tied into production in the near future. Up hole zones of
interest will be tested at a later date due to the high indicated productivity
of the principal zone of interest.
    Since drilling commenced in 2007 at Puesto Morales, five new oil wells
have been drilled on that Block, with total established or tested productivity
of approximately 3,700 bbl/d of Medanito light gravity crude oil. This is in
addition to the 690 bbl/d tested at the 1001 well on the Rinconada Block.
These volumes will start to impact Petrolifera's production levels near-term
as wells are tied in and completed or in some cases, placed on pump.
    For the record, the 1016 well is currently on pump at 150-170 bbl/d with
no water and is awaiting installation of a new pump which is anticipated will
result in increased productivity. Following a recent paraffin cleanout
procedure, the 1021 well has been flowing recently at rates up to 530 bbl/d,
although Petrolifera anticipates this well will likely require a pump and
regular servicing due to minor paraffin content in the well's crude oil. It
will be recalled this well experienced excellent flow rates on test and then
stopped flowing and it would appear paraffin content may be responsible for
the well's erratic performance.
    The 1023 well is currently on pump at 200 bbl/d of crude oil with a five
percent water cut. A new pump installation is anticipated to add a further
50 bbl/d of production when completed. The 1056 well is also being completed
as a 500 bbl/d dual zone Sierras Blancas oil well.
    The drilling rig which was used to drill the first five wells on the
Puesto Morales Block is now drilling ahead at the 1028 step out well on the
eastern perimeter of the Block in proximity to the embalse or reservoir.
Please refer to Petrolifera's website at www.petrolifera.ca for maps of the
region and also refer to the Investor Information section and click on the
link for the presentation made by management at the recent Annual Meeting held
in Calgary on May 8, 2007.
    Petrolifera still plans to drill up to 55 wells on its Argentinean
acreage during the 2007 calendar year. With additional rigs being secured and
becoming available, and with ample prospects and leads to evaluate,
Petrolifera remains optimistic it can achieve its target exit rate of
21,000 boe/d by year end 2007.
    The positive results reported today are tempered somewhat by the
company's decision to curtail its production from its first fourteen wells by
approximately 25-30 percent during the months of April and May 2007 and by the
impact, in certain cases, of pressure decline or water incursion. Most of the
wells in the northern lobe surrounding the 1003 complex are choked back
presently to conserve natural gas until the company's high pressure pipeline
is completed and due to the high gas/oil ratio of this structurally higher
culmination. Also, certain wells have encountered some pressure depletion
awaiting the initiation of a pressure maintenance program, involving a
waterflood, also scheduled for the fall of 2007. Finally, the highly prolific
1013 well on the southern culmination recently recorded a jump in the recorded
water cut and as monitoring is initiated, the well has been choked back to
production levels of around 900-1,000 bbl/d of crude oil with a related water
cut of about 30 percent. This was expected as the 1013 well is considerably
downdip to the 1002 and 1012 wells on this culmination and is situated in
proximity to the 1024 well which first encountered the oil/water contact in
the Sierras Blancas Formation. The 1013 well has been a wonderful well for
Petrolifera since first being placed on stream about one year ago at very high
rates, which persisted until recently.
    While these curtailments and declines will result in lower sales during
the second quarter of this year, the impact of new wells is expected to propel
Petrolifera's production and sales of crude oil towards 18,500 bbl/d by
year-end 2007, with the balance of its forecast equivalent production
anticipated from new natural gas sales into available industrial markets.
    Petrolifera now controls upwards of one million acres of contiguous
petroleum and natural gas rights in the eastern margin of the Neuquén Basin
onshore Argentina. Over $110 million of capital programs have been targeted
for this extensive acreage spread during the current year, including for
completion of the company's treatment plant, construction of a new water
supply pipeline including filtration and oxygen removal for its planned
waterflood, drilling of injector wells and initiation of a long-term pressure
maintenance program to enhance productivity and improve recovery factors and
the construction of a new 30 kilometer 10-inch high pressure natural gas
pipeline from Puesto Morales to Medanito. Petrolifera has now assumed full
operatorship of its Argentinean field activities and expects more timely and
efficient completion of its various productivity enhancement plans during the
ensuing winter months in Argentina.
    Commenting on its recent successes, Mr. Gary Wine, President and Chief
Operating Officer and the architect of Petrolifera's technical evaluations,
stated that "While we have experienced some recent short-term production and
sale curtailments and some delays in getting our field work all completed at
the pace we would have preferred, the company is on track to achieve its
short-term and intermediate-term goals. The 1027 discovery on the Puesto
Morales Block reaffirms we have not yet fully-evaluated this area nor its
potential. Perhaps more importantly, the Rinconada 1001 well established a new
light-gravity crude oil field for the company. Encountering close to 700 bbl/d
of flowing light gravity crude oil at a depth of around 1,000 meters is rare
in a mature basin such as the Neuquén. The economics should be very gratifying
and the prospect for drilling numerous follow-up wells is excellent. This
should add not only increased production but more importantly reserves to
enhance the company's longer-term outlook in Argentina. The Puesto
Morales/Rinconada Concession is truly remarkable. Our geological model has met
the test and we hope to transport it to successful exploration on our
newly-acquired extensive and contiguous acreage in the region."

    Petrolifera is a Calgary-based crude oil and natural gas exploration and
production company active in Argentina, Colombia and Peru in South America.
Its principal production is secured from the Puesto Morales/Rinconada
Concession in the Neuquén Basin, Argentina. The company also owns 100 percent
of and operates two large licenses onshore Peru where drilling is anticipated
for 2008. Recently, Petrolifera acquired two new blocks in Colombia and it is
negotiating to secure one additional block in that country. Over 7.5 million
acres of rights are now held by Petrolifera, which has over $70 million of
working capital and no debt. Its common shares are listed for trading on the
Toronto Stock Exchange under the symbol PDP.

    FORWARD LOOKING STATEMENTS

    This press release contains forward-looking statements, including but not
limited to future drilling plans, anticipated capital expenditures, forecast
production, anticipated reserve additions and estimated flow rates and levels
of water incursions. These statements are based on current expectations that
involve a number of risks and uncertainties, which could cause actual results
to differ materially from those anticipated. These risks include, but are not
limited to risks associated with the oil and gas industry (e.g. operational
risks in development, exploration and production, delays or changes in plans
with respect to exploration or development projects or capital expenditures;
the uncertainty of reserve estimates; the uncertainty of estimates and
projections in relation to production, costs and expenses and health, safety
and environmental risks), the risk of commodity price and foreign exchange
rate fluctuations, the uncertainty associated with negotiating with foreign
governments and risk associated with international activity. Additional risks
and uncertainties are described in the company's Annual Information Form which
is filed on SEDAR at www.sedar.com.
    The company's ability to complete its capital program and potentially
increase production volumes and reserves is dependent on access to services,
drilling rigs and equipment. Similarly, the company's ability to increase
sales of oil and natural gas is dependent on sustained productivity of new and
existing wells, maintenance (or reduction) of water cuts and completion of
certain infrastructure and transportation systems that are currently under
construction. There can be no assurance that the flow rates of newly drilled
wells will result in stabilized production at these levels or that the
company's new or existing high productivity wells will not incur higher water
cuts than that reported herein or reductions in reservoir pressures, resulting
in a decision to further curtail production pending implementation of the
proposed pressure maintenance program or other remedial measures. Due to the
risks, uncertainties and assumptions inherent in forward-looking statements,
prospective investors in the company's securities should not place undue
reliance on these forward-looking statements. Forward looking statements
contained in this press release are made as of the date hereof and are subject
to change. The company assumes no obligation to revise or update forward
looking statements to reflect new circumstances, except as required by law.
    A barrel of oil equivalent (boe), derived by converting gas to oil in the
ratio of six thousand cubic feet of gas to one barrel of oil, may be
misleading, particularly if used in isolation. A boe conversion is based on an
energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.





For further information:

For further information: Richard A. Gusella, Executive Chairman,
Petrolifera Petroleum Limited, Phone: (403) 538-6202, Fax: (403) 538-6225,
inquiry@petrolifera.ca, www.petrolifera.ca

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PETROLIFERA PETROLEUM LIMITED

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