Petrolifera provides Argentina operating update; active drilling continues; facilities nearing completion; Q3 2007 sales improve over Q2 2007; year over year sales growth 90%



    CALGARY, Oct. 22 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) hereby
provides an operational update for its shareholders, detailing activity and
certain operating results since our last operating update press release on
September 12, 2007.
    On an equivalent basis, successive period sales improved nine percent
during the third quarter of 2007, compared to the prior quarter this year.
Crude oil sales were up 8.3 percent to 7,195 bbl/d. Natural gas sales were up
26 percent to 2.2 mmcf/d, compared to 1.8 mmcf/d.
    On a year-to-date basis, crude oil sales in 2007 were up 91 percent over
2006 to 8,376 bbl/d, while natural gas sales were up 57 percent to 1.9 mmcf/d.
On an equivalent basis, sales grew 90 percent to 8,696 boe/d.
    The improvement reflects the continuing impact of successful drilling at
both Puesto Morales and Rinconada onshore in the Neuquén Basin, Argentina.
However, results for 2007 do not yet fully reflect the productive capacity of
the two areas, which continue to be evaluated with exploratory and development
wells and await the impact of the company's pressure maintenance waterflood
project on the northern and central pools at Puesto Morales. This project is
in the final stages of completion and implementation.
    Petrolifera's completion of its overall production facilities, including
its waterflood project, its water injection program, its oil treatment plant
and its high pressure natural gas pipeline has been affected by the assumption
of direct operatorship upon discharge with cause of the prior contract
operator, the arising and resultant necessity to redesign its plant to meet
operational and regulatory requirements and by the shortage of critical key
equipment, including the unavailability of high pressure valves, pump engines
and compression on a timely basis. This was unfortunately exacerbated by the
shortage of natural gas to industrial users during the recent winter months in
Argentina.
    Also, during the drilling of proposed water injection wells, oil bearing
reservoir was encountered and resulted in certain of these wells being
completed as oil wells, thereby ensuring optimum recovery from the identified
pools over the life of the field. While this was a most favorable outcome to
encounter and should assist in enhanced reserve recognition when the company's
reserve reports are updated at year end 2007, new injector wells had to be
drilled in down dip locations to ensure no recoverable oil was left in the
ground.
    In summary, Petrolifera's Puesto Morales facilities and projects are all
in a very advanced stage. Natural gas is being delivered at low pressure
through the previously completed natural gas pipeline until compression is
available and new non-associated natural gas wells are drilled and tied into
the pipeline. While it is always difficult to predict the timing of completion
of projects in any jurisdiction, in large measure Petrolifera's facilities
should be substantially operative in November 2007 with the balance operative
by year-end.
    As a result, Petrolifera anticipates continued and accelerated production
improvements during the balance of the year. However, given the difficulties
in predicting the timing of events which impact on the company's production
and sales levels in Argentina, management has determined it will no longer
provide detailed guidance with respect to anticipated operating and financial
results. This may be reconsidered once production levels have stabilized
following the implementation of the company's pressure maintenance waterflood
project at Puesto Morales and when there is less of an exploratory component
to the company's activities in the areas from which it is producing and
selling its crude oil and natural gas.

    PUESTO MORALES, ARGENTINA

    Since mid-August 2007 Petrolifera has drilled, completed or tested eight
wells at Puesto Morales and is currently drilling two new wells. Two of these
wells - 1025 and 1037 - will be water injector wells. Six of the wells - 1031,
1033, 1036, 1042, 1043 and 1044 - have all been completed as light gravity
crude oil wells and have all been placed on pump due to prevailing reservoir
conditions or due to unstable flow rates without artificial lift. This is very
common as areas achieve a certain level of maturity awaiting pressure
maintenance. Their productivity and that of other flowing oil wells, which
have been curtailed pending facilities completion, should be positively
impacted once the waterflood project is initiated.
    There are three other wells which are either drilling or awaiting
completion - the 1006 well, which is drilling ahead in an up dip position to
the original La Ramona well drilled by previous owners in 2003; the 1050 well,
situated northwest of the 1061 and 1013 wells in the central lobe and
southeast of the 1006 well; and the 1053 well, which offsets the excellent
1028 Centenario oil discovery on the eastern edge of the Puesto Morales
concession and is standing cased, awaiting testing.
    With the exception of the 1006 and 1050 wells, which are currently
drilling, Petrolifera has not yet been able to drill and test its
higher-potential exploratory locations on the Puesto Morales block, primarily
as it has been awaiting the arrival on location of a larger, Chinese-built
drilling rig to be operated by one of its drilling contractors. This delay has
restricted the company's ability to drill wells in the northeastern portion of
the Puesto Morales Block. These wells and others to the south must be drilled
directionally due to the proximity of the surface locations to the Rio
Colorado water reservoir or "embalse", which bisects the block. Petrolifera
has to move the surface locations to ensure they will not be flooded during
the rainy season with resultant high water levels. Also, regulatory issues and
delays thus far in late 2007 have also limited Petrolifera's ability to drill
some other high potential exploratory prospects on the southern portion of the
Block. The aforementioned drilling rig is now anticipated on location in
November and as a break-in period will be required for this new rig and crew,
it now appears these high potential wells will be deferred until 2008.

    RINCONADA, ARGENTINA

    Petrolifera has now drilled seven wells and is now drilling its eighth
well on the large seismically-defined feature on its Rinconada Block in
Argentina. These wells are being drilled primarily for light gravity Sierras
Blancas crude oil from a depth of approximately 1,000 meters. Some additional
zones or formations, including fractured basement, may also be oil-bearing and
prospective producing horizons.
    To date, the Rinconada (RN) 1001 discovery, RN 1005, RN 1006 (to
distinguish it from Puesto Morales 1006) and RN 1010 (first step down dip from
RN 1001) have been completed as oil wells, with RN 1005, RN 1006 and RN 1010
on pump at rates up to 150 bbl/d. The RN 1001 discovery continues to flow at
rates up to approximately 150 bbl/d. Additionally, the RN 1009 well is
currently being completed and the RN 1007 well (second step down dip from RN
1001) is standing cased, ready for testing. The RN 1029 well, drilled at some
distance southwest of the RN 1001 well, has been suspended due to problems
arising from poor subsurface hole conditions and a poor cement job when
running casing. It did encounter encouraging oil shows while drilling and oil
pay was calculated based on logs. The company is undecided whether to attempt
a reentry to test or to drill a replacement well.
    Petrolifera remains enthusiastic about the overall reserve potential of
this significant new light gravity crude oil play and has dedicated one
drilling rig and one service rig to the block to continue extending the aerial
extent and associated reserves and production from the seismically-defined
accumulation.

    OTHER

    Petrolifera anticipates it will be able to drill approximately eleven
more wells on the Puesto Morales Block and six more wells on the Rinconada
Block during the balance of 2007, approximately ten less wells than originally
budgeted, due largely to the late arrival of rigs.
    Petrolifera has commenced an arbitration procedure with respect to
securing its 50 percent interest in the Salinas Grande I concession in La
Pampa Province, Argentina. The designated partners have been reluctant to
complete the transaction as agreed, necessitating this action.
    The former contract operator of the Puesto Morales Concession has
commenced an arbitration procedure against Petrolifera, claiming wrongful
dismissal and seeking financial compensation, including damages. Petrolifera
is of the opinion the action is without merit and intends to respond and
counterclaim. Potential damages are not quantifiable at this time, but in any
event are not anticipated to be material to the company.
    The company's Board of Directors will meet on November 6, 2007 at which
time it will review and authorize release of the company's Interim Report for
the three months and nine months ended September 30, 2007, including detailed
operating and financial results. At that time, the Board will also consider
management's recommended capital program for the balance of 2007 and for
calendar 2008 for all areas of the company's Argentinean operations,
supplemented by proposed drilling and seismic on company-owned concessions and
licenses in Peru and Colombia.
    It now appears that Petrolifera will not fully expend its anticipated
2007 capital budget of $148 million, due to delays in Argentina as detailed
herein. The full extent of the reduction in planned 2007 outlays will be
conveyed in conjunction with the impending release of detailed financial and
operating results on November 6, 2007.
    Also, shareholders will be updated on developments related to the
company's holdings of asset-backed commercial paper ("ABCP") in the Interim
Report for the third quarter 2007. This will allow management to secure as
much new information as possible and to review it with the Board of Directors
of the company, prior to its inclusion in the Interim Report. At this
juncture, the issuers of the ABCP are in default and there is an agreed
moratorium among the holders of ABCP on the taking of any actions to recover
or remedy the situation, while cooperative efforts by holders are underway to
resolve the current impasse.

    Petrolifera Petroleum Limited is a Calgary-based oil and natural gas
exploration and production company engaged in drilling and production
operations in Argentina and in exploration programs in Peru and Colombia. The
company holds interests in over one million acres of oil and natural gas
rights in each of Argentina and Colombia and holds over 5 million acres under
two licenses in Peru. Petrolifera owns 100 percent of and operates its
principal producing property and operates or is the designated operator of all
its exploratory lands. Petrolifera anticipates it will commence drilling in
both Colombia and Peru during 2008. The company's 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 timing for completion
of facilities and projects. 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 third parties located in foreign
jurisdictions and the 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, implementation of its water flood and water injection program
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 previously experienced 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: R. A. Gusella, Executive Chairman, Petrolifera
Petroleum Limited, Phone (403) 538-6202, Fax (403) 538-6225,
inquiries@petrolifera.ca, www.petrolifera.ca

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PETROLIFERA PETROLEUM LIMITED

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