Petrolifera Petroleum provides activity update

    CALGARY, Jan. 14 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) hereby
provides an update on the company's activity during calendar 2007.
    Petrolifera had a productive if somewhat challenging year in 2007. The
company drilled at total of 47 wells, all on its Puesto Morales/Rinconada
Concession in the Neuquén Basin, Argentina, during the year. This drilling
resulted in 33 oil wells, two natural gas wells, three water injector wells,
two dry holes, four non-productive or suspended wells and three wells were
being completed at year end.
    At Puesto Morales, a total of 35 wells were drilled, resulting in 25 oil
wells, two natural gas wells, three water injector wells, two dry holes, one
suspended well and two wells were on completion at year end. At Rinconada, a
total of twelve wells were drilled, resulting in eight oil wells, three
non-productive or suspended wells and one well was being completed at year
end. This brings to over 60 the number of wells drilled on the Concession
since first drilling was initiated in late 2005.
    A major undertaking during 2007 was the design, construction and
activation of the company's infrastructure and production facilities. This
included gathering lines, water treatment facilities, water disposal
facilities, a high pressure natural gas pipeline and initiation of a
waterflood at Puesto Morales North. The timetable for these projects was
frustrated during the year by energy shortages in Argentina, especially during
their winter months, which delayed access to requisite parts and equipment for
the various component parts needed by Petrolifera to activate its pressure
maintenance program. There were also delays encountered in securing pumps and
certain high pressure valves for the company's natural gas pipeline and
related facilities.
    Petrolifera's sales grew considerably during 2007. All sales were of
production in Argentina. Crude oil sales increased 33 percent over 2006
levels, to average 7,921 barrels per day. Much of the improvement occurred
during the early part of the year, when flush production from new Sierras
Blancas discoveries at Puesto Morales contributed to record quarterly sales,
cash flow from operations before changes in working capital and near-record
earnings. Subsequently, production curtailments for natural gas conservation
purposes, water incursion at a key high productivity well (1013), pressure
depletion awaiting the waterflood and delays and equipment shortages affected
production levels.
    Natural gas sales were stronger at modestly better prices during 2007,
awaiting the startup of the waterflood and completion of the company's high
pressure natural gas pipeline to Medanito. Sales rose 80 percent to average
2.1 mmcf/d in 2007.
    On an equivalent basis, Petrolifera's 2007 sales rose 34 percent to
average 8,279 boe/d compared to only 6,171 boe/d in 2006, the company's first
full year of operations. Again, full year results were reflective of the
influence of oil production declines during the year, awaiting activation of
the company's pressure maintenance scheme which is now underway. Fourth
quarter sales were 7,042 boe/d, slightly below third quarter for similar
reasons. During November, production was curtailed due to field activities
associated with the startup of certain key facilities, pump installations and
the like, well in excess of the impact of natural declines. This was evidenced
by the fact that December sales exceeded November levels by 23 percent and
early January 2008 levels were even higher.
    Petrolifera expects robust growth in production and sales in 2008 as
increased natural gas volumes are marketed at improved average prices and as
new drilling and the impact of the company's recently activated pressure
maintenance or waterflood program at Puesto Morales is felt. Also, the company
is optimistic about the risk adjusted potential of its planned exploration
program in Argentina during the current year as it continues to evaluate new
Jurassic Sierras Blancas and Loma Montosa prospects at Puesto Morales as well
as Cretaceous Centenario opportunities on its Puesto Morales block as well as
at its Gobernador Ayala II concession, on which a 3D seismic program was
recently completed. This latter block lies just east of and on trend with an
area being developed by another Canadian company.
    Petrolifera has already announced a 69 well, $76 million capital budget
for Argentina during 2008. This planned program will include extensive
drilling at Puesto Morales/Rinconada, seismic and drilling on Vaca Mahuida,
drilling on the Gobernador Ayala II concession and 3D seismic and drilling on
the recently confirmed Puesto Guevara Concession in Rio Negro Province,
Argentina. Petrolifera now owns 493,310 net acres of oil and gas rights in
Argentina, the equivalent of 21 townships in Western Canada. The total does
not include any interest which Petrolifera may ultimately hold in the Salinas
Grande concession in La Pampa Province. Currently, the company is operating
with three rigs and four service rigs.
    The company's Argentinean budget will continue to be evaluated in the
context of the actual outcome of exploratory drilling results and the evolving
policy framework for the country. Recently announced price controls for crude
oil and continuing control of natural gas prices below fair value will impact
on anticipated cash flow, especially if refineries attempt to transfer imposed
burdens on to producers. It is apparent that if increased deregulation was to
occur, improved cash flow from operations before changes in working capital
would likely result in higher levels of reinvestment in Argentina. Since
Petrolifera commenced drilling operations in late 2005, the company has
invested approximately $100 million in the country.
    Plans are advancing for early drilling in Colombia. Petrolifera has
identified three prospective drillable prospects on its Sierra Nevada I
License in the Lower Magdalena Basin. Discussions to secure a drilling rig for
a July/August commencement of activities are continuing. A seismic program is
also anticipated in 2008 on the company's Turpial Block in the Upper Magdalena
Basin. Staffing is underway and an office has been established in Bogota,
Colombia. Petrolifera controls over one million acres of petroleum and natural
gas rights in Colombia, fast becoming one of the exploration hotspots in South
America for the oil and natural gas industry. An initial 2008 capital budget
of $8 million has been established for Colombia; this may be expanded
depending upon results and as mentioned, developments in Argentina, although
regardless the company has the wherewithal to expand its Colombian budget as
warranted by opportunities that develop.
    Petrolifera's 2008 Peru capital budget has been established at
$56 million, to cover the cost of extensive seismic programs on both Ucayali
Block 107 and on Maranon Block 106 and for the drilling of the company's first
well on Block 107. These are both jungle blocks with attendant high costs of
exploration, including for access and when drilling, for helicopter support.
Petrolifera's seismic program on Block 107 is proceeding very favorably, with
62 percent of lines cut at year-end 2007; 60 percent of shot holes have been
drilled and 24 percent of lines have been shot. Early indications from
received data are considered excellent and the company is proceeding with
preparation of its Environmental Impact Assessment ("EIA") applications for a
number of drilling locations. The data will be received, interpreted and
reviewed for selection of the preferred prospects, which are anticipated to
have considerable potential.
    As with Colombia, discussions for a suitable heli-transportable rig are
advancing to the contract negotiation stage, initially for a two-well
commitment. Drilling is tentatively anticipated for approximately October
2008, subject to regulatory approval of the company's drilling EIA.
    Petrolifera continues to await clarification with respect to its
significant $37.7 million face value investment in Asset Backed Commercial
Paper ("ABCP"). It will be recalled the company recorded a book impairment of
this investment during the third quarter 2007 and recategorized the investment
from a short term asset to long term on its balance sheet. We continue to seek
ways to recover the full amount of our investment into what was rated as R-1
High by a recognized bond rating agency in Canada. Included in this process is
a continuing dialogue with the chartered bank whose investment arm sold the
investment to Petrolifera and awareness of the initiatives of the Montreal
Accord. This has been a slow and arduous process with limited free flow of
information. We will advise shareholders and the investment community of any
developments directly affecting Petrolifera or its holdings to the extent we
are apprised of same.
    In the interim, Petrolifera has sufficient cash flow from operations
before changes in working capital and access to available credit to be able to
fund its capital program without undue difficulty. Obviously, the company
would prefer to receive its funds from its ABCP on a timely basis to avoid
accessing available credit arrangements for its activities, but fortunately is
in a position where it does not have to compromise its growth programs as a
consequence of the mid-2007 disappearance of liquidity for these short-term,
highly-rated instruments.
    In late January 2008 Petrolifera is hosting a visit by invitation of
numerous Canadian investment analysts and some portfolio managers from Canada
and the United States. These individuals will visit the company's facilities
at Puesto Morales and will be provided insight into the opportunities and
challenges facing the oil and gas industry in South America by a number of
regional experts. Additionally, the company will be reviewing its assets and
activities. Accordingly, in conjunction with this press release we will be
posting an updated Investor Presentation on our website at
Click on the link Investor Info and then on Investor Presentations to access
the January 2008 Power Point slides.
    The company has commissioned GLJ Petroleum Consultants of Calgary,
Alberta to prepare its year-end 2007 reserve report. This report is
anticipated to be received during the month of February 2008 and will be
released to the public after it has been reviewed by the company's Reserves
Committee and accepted by its Board of Directors.
    The company's audited financial and operating results are anticipated to
be released to the public by way of press release on or about March 8, 2008.
    In summary, Petrolifera made considerable progress in 2007. Crude oil
sales were up 33 percent over 2006. Natural gas sales were up 80 percent over
2006. On an equivalent basis, sales were up 34 percent year over year to
8,279 boe/d, compared to sales of 6,171 boe/d in 2006. During 2007 Petrolifera
drilled a record 47 wells in Argentina, resulting in 33 oil wells, two natural
gas wells and three injectors, with only two dry holes (the first dry holes
since activation of drilling in 2005), four suspended wells and three wells
being completed at year end. Major expenditures were made during 2007 on field
facilities including for water treatment and disposal, a waterflood or
pressure maintenance facility and a high pressure natural gas pipeline to
Medanito from Puesto Morales. Over $100 million of capital expenditures are
anticipated for the full year. These investments are expected to result in
restoration of the company's production and sales growth during 2008, aided by
continued drilling activity in Argentina (including on new blocks at
Gobernador Ayala II, Vaca Mahuida and Puesto Guevara) where the company
controls over 493,000 net acres of petroleum and natural gas rights. Seismic
and drilling is also anticipated in 2008 in Colombia and in Peru on what are
anticipated to be high potential prospects. The company is financially
self-sufficient with adequate cash, anticipated cash flow and available credit
to fund an anticipated $140 million capital program in 2008.

    Petrolifera is a Calgary-based crude oil and natural gas exploration,
development and production company with activities in Argentina, Peru and
Colombia. The company has branch offices in Buenos Aires, Argentina; Bogota,
Colombia and Lima, Peru. Its common shares are listed for trading on the
Toronto Stock Exchange under the symbol PDP. There are presently 50.1 million
common shares outstanding (54.4 million fully-diluted). The company's growth
from a modest startup base in late 2005 when it went public has been organic,
through successful drilling programs in Argentina. Since that time the company
has expanded into both Colombia and Peru, and controls approximately
6.5 million net acres of exploration and production rights in these three
South American countries. Petrolifera operates with a very small head office
staff of three full-time professionals, two part-time individuals and solely
employs nationals in all of its foreign offices. The company prides itself on
its efficiency of operations, low finding and development and on stream costs,
low operating costs and its efficient use of capital.

    Forward-Looking Information
    This press release contains forward-looking information, included but not
limited to future exploration and development opportunities, future drilling
plans, anticipated capital expenditures, forecast production, anticipated
reserve additions in respect of the company's undeveloped properties in
Argentina, Colombia and Peru and estimated timing of completion of facilities
and projects. Forward looking information is not based on historical facts but
rather on Management's expectations regarding the company's future growth,
results of operations, production, future capital and other expenditures
(including the amount, nature and sources of finding thereof), competitive
advantages, plans for and results of drilling activity, environmental matters,
business prospects and opportunities. Such forward looking information
reflects Management's current beliefs and assumptions and is based on
information currently available to Management. Forward looking information
involves significant known and unknown risks and uncertainties. A number of
factors could cause actual results to differ materially from the results
discussed in the forward looking information, including but not limited to,
risks associated with the oil and gas industry (e.g. operational risks in
development, exploration and production, delays or changes to 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
environment 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. Addition risks and uncertainties are
described in the company's Annual Information Form which is filed on SEDAR at The company's ability to complete its capital program and
potentially increase production volumes and reserves is dependant upon access
to services, drilling rigs and equipment. Similarly, the company's ability to
increase sales of crude oil and natural gas is dependent upon sustained
productivity of new and existing wells, implementation of its water flood and
water injection program and completion of certain infrastructure and
transportation systems currently under construction or recently completed.
Although the forward looking information contained herein is based upon
assumptions which Management believes to be reasonable, the company cannot
assure investors that actual results will be consistent with this forward
looking information. This forward looking information is made as of the date
hereof and the company assumes no obligation to update or revise this
information to reflect new events or circumstances, except as required by law.
Because of the risks, uncertainties and assumptions inherent in forward
looking information, prospective investors in the company's securities should
not place undue reliance on this forward looking information. A barrel of oil
equivalent (boe) is derived by converting natural gas to oil in the ratio of
six thousand cubic feet of natural gas to one barrel of oil and 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. Cash flow from
operations before working capital adjustments is a non-GAAP measurement which
is used by Management as a measure of funds from operations available for
capital programs.

For further information:

For further information: Richard A Gusella, Executive Chairman,
Petrolifera Petroleum Limited, Phone: (403) 538-6202, Fax: (403) 538-6225;;

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