Petrolifera Petroleum reports lower reserves and pre-tax present values for year ended December 31, 2008; Initiates process to sell Argentinean assets

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CALGARY, March 2 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) announces today it has received the estimates of the company's 1P ("Total Proved"), 2P ("Total Proved plus Probable") and 3P (Total Proved plus Probable plus Possible) reserves, as prepared by GLJ Petroleum Consultants of Calgary, Alberta ("GLJ") in a report with an effective date of December 31, 2008 ("GLJ 2008 Report"). The company's reserves declined on a year over year basis, reflecting 2008 production and sales, technical revisions primarily arising from some current complications with the efficiency of the company's waterflood at Puesto Morales Norte in the Neuquen Basin, Argentina, offset positively by modest recognition of reserve additions through exploration and improved recovery in Argentina and by the initial recognition of reserves for the company in Colombia.


The GLJ 2008 Report and the estimates provided herein were prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and in accordance with National Instrument 51-101 ("NI 51-101"). Comparisons provided herein with respect to Petrolifera's reserves are to estimates contained in a report prepared by GLJ with an effective date of December 31, 2007 ("GLJ 2007 Report"). The GLJ 2008 Report was prepared utilizing the GLJ January 1, 2009 price forecast, effective December 31, 2008 and adjusted to Petrolifera's asset mix and specific pricing circumstances in Argentina and in Colombia. In the GLJ 2008 Report, future net revenue is calculated after deduction of forecast royalties, operating expenses, capital expenditures and well abandonment costs but before corporate overhead or other indirect costs, including interest and income taxes. The pre-tax present value of future net revenue ("present value") is calculated by GLJ using various discount rates; this release will provide undiscounted future net revenue and the 10 percent present value thereof.


All references to barrels of oil equivalent ("boe") are calculated on the basis of 6 mcf: 1 bbl. Readers are cautioned that the conversion used in calculating barrels of oil equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Furthermore, boe may be misleading if used in isolation. Future net revenues disclosed herein do not represent fair market value. Also, estimations of reserves and future net revenue to be discussed in this press release constitute forward-looking information. See "Forward Looking Information" below.





Reserve Volumes and Values





The GLJ 2008 Report estimated that, after production of approximately 2.4 million barrels of crude oil and natural gas liquids, Petrolifera's 1P crude oil and natural gas liquids ("NGL") reserves decreased 25 percent to 11.3 million barrels as at December 31, 2008, compared to 15.1 million barrels at December 31, 2007. The decrease primarily reflects production and technical revisions, associated with recovery factors related to waterflood performance and offset by new discoveries of proved reserves, the majority of which are in the proved producing category. As 1P reserves declined, there is no basis for calculating reserve replacement ratios.


Petrolifera's 1P natural gas reserves also declined by almost 6 Bcf or 36 percent to 10.5 Bcf after deduction of record production in 2008 of 1.9 Bcf and the impact of technical revisions, offset by exploration discoveries.


Petrolifera's 2P crude oil and NGL reserves decreased 20 percent to 17.2 million barrels, reflecting the impact of production and waterflood related technical revisions, offset by exploration success and improved recovery at certain wells. At December 31, 2007, 2P crude oil and NGL reserves were 21.5 million barrels.


On an equivalent basis, Petrolifera's 1P reserves totaled 13.0 million boe at year end 2008 compared to 17.8 million boe in 2007, for a decrease of 27 percent. These reserves were forecast to generate $284 million of future net revenue, with an estimated pre-tax 10 percent present value ("10% PV") of $212 million.


On an equivalent basis, Petrolifera's 2P reserves were estimated to total 20.0 million boe at December 31, 2008 compared to 25.6 million boe in 2007 after production of 2.8 million boe and negative technical revisions, partially offset by new discoveries. GLJ estimates these reserves will generate $493 million of future net revenue, with an estimated pre-tax 10% PV of $328 million. The company's calculated reserve life index, calculated by dividing remaining 2P reserves at December 31, 2008 by 2008 total boe production, was approximately 7.1 years.


Petrolifera also commissioned GLJ to provide an estimate of possible reserves, which were last estimated effective December 31, 2007. GLJ estimated the company's 3P crude oil and NGL reserves to be 25.3 million barrels, with 3P natural gas reserves estimated at 24.8 Bcf and 3P equivalent reserves were estimated at 29.5 million boe. These reserves are estimated to generate $830 million of future net revenue with an estimated pre-tax 10% PV of $505 million.


The volume of possible reserves estimated at 9.4 million boe underscores continuing recognition of the development potential for both crude oil and natural gas of the lands reviewed in the GLJ 2007 Report, which included the La Pinta prospect in Colombia and the Puesto Morales/Rinconada concessions in Argentina. These estimates did not include a review of the company's undeveloped exploratory concessions at Vaca Mahuida, Puesto Guevara and Gobernador Ayalla II, all in Argentina nor of Petrolifera's exploratory holdings outside of the La Pinta prospect in Colombia and none of the company's extensive holdings in Peru.


The following tables summarize the information contained in this press release. Tables may not add due to rounding.




<<
Petrolifera Petroleum Limited
Crude Oil, NGL and Natural Gas Reserves(1)(2)(3)(4)(5)
------------------------------------...
OIL & NGLs (mbbl) NATURAL GAS (mmcf) BOE's (mboe)
31- 31- 31- 31- 31- 31-
Reserve Dec- Dec- Dec- Dec- Dec- Dec-
Category 07 08 07 08 07 08
------------------------------------...
% % %
GLJ GLJ Change GLJ GLJ Change GLJ GLJ Change

Total Proved
(1P) 15,068 11,307 (25) 16,281 10,456 (36) 17,782 13,050 (27)
---------------------------- --------------- ---------------
Total Probable 6,452 5,869 (9) 7,992 6,704 (16) 7,784 6,985 (10)
---------------------------- --------------- ---------------
Total Proved
plus Probable
(2P) 21,520 17,175 (20) 24,273 17,160 (29) 25,566 20,035 (22)
---------------------------- --------------- ---------------
Total
Possible 11,940 8,156 (32) 9,187 7,601 (17) 13,471 9,423 (30)
---------------------------- --------------- ---------------
Total Proved
plus probable
plus possible
(3P) 33,460 25,331 (24) 33,460 24,761 (26) 39,037 29,458 (25)
------------------------------------...

Petrolifera Petroleum Limited
Before Tax Present Value of Future Net Revenue(1)(2)(3)(4)(5)
------------------------------------...
Before Tax Present
Value at 31-Dec-08

Discounted
Reserve Category Undiscounted at 10%
------------------------------------...
$000 $000

Total Proved (1P) $284,341 $212,073
Total Probable $208,950 $115,934
------------------------
Total Proved plus Probable (2P) $493,291 $328,007
Total Possible $336,300 $176,800
------------------------
Total Proved plus probable plus possible (3P) $829,591 $504,807
------------------------------------...

Notes:
1) Proved reserves are those reserves that can be estimated with a high
degree of certainty to be recoverable. There is at least a 90%
probability that the actual quantities recovered will equal or exceed
the estimated proved reserves.
2) Probable reserves are those additional reserves that are less certain
to be recovered than proved reserves. It is equally likely that the
actual remaining quantities recovered will be greater or less than
the sum of the estimated proved plus probable reserves.
3) Possible reserves are those additional reserves that are less certain
to be recovered than probable reserves. There is at least a 10%
probability that the quantities actually recovered will be equal to
or exceed the sum of proved plus probable plus possible reserves.
4) Reserve volumes, future net revenue and pre-tax present value of
future net revenue do not include undeveloped land values in
Argentina, Colombia or Peru.
5) Reserves are company working interest reserves before royalty.
>>






Sale Process





Petrolifera also announces that its Board of Directors has authorized the company to enter in to an engagement agreement with Tristone Capital ("Tristone") of Calgary, Houston, Buenos Aires and London, whereby Tristone would immediately commence to establish a data room, which will be made available to qualifying companies. Tristone will assist Petrolifera in the sale of Petrolifera's interests in Argentina, which are primarily indirectly held by a wholly-owned Barbadian subsidiary. It would be Petrolifera's intention to sell its interests in a tax effective manner and to redeploy the proceeds in its high-potential exploration activities in Colombia and Peru, after discharging related outstanding long-term indebtedness. While Petrolifera recognizes continuing potential associated with its extensive Argentinean assets, both from an exploratory and exploitation perspective, it is the opinion of management and the company's Board of Directors that the company's holdings in Colombia and Peru have greater identified growth potential. Petrolifera's desire is to sell its Barbadian subsidiary and related assets as a going concern, with view to the purchaser providing continuing employment to the company's managerial, technical and operating staff to the fullest extent possible. Arrangements are contemplated to ensure fair and appropriate treatment under prevailing employment law to both continuing and redundant employees and contractors, should the prospective purchaser not require all of Petrolifera's current Argentinean employees and contractors on a continuing basis.





Forward Looking Information





This press release contains forward-looking information, including but not limited to estimated reserves and future net revenues, reserve life index and the proposed sale of Petrolifera's Argentinean oil and gas interests. The information is 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. The current financial crisis has resulted in severe economic uncertainty and resulting liquidity in capital and credit markets which increases the risk associated with the company's planned sale of its Argentinean oil and gas interest. There can be no assurance that the proposed sale process will result in offers for the company's Argentinean oil and gas interests that will be acceptable to the company and their own risks associated with completion of any agreed upon transaction. Additional risks and uncertainties are described in the company's Annual Information Form which is filed on SEDAR at www.sedar.com.


The reserves and future net revenue in this press release represent estimates only. The reserves and future net revenue from the company's properties have been independently evaluated by GLJ with effective dates of December 31, 2008 and December 31, 2007, respectively. This evaluation includes a number of assumptions relating to factors such as initial production rates, production decline rates, ultimate recovery of reserves, timing and amount of capital expenditures, marketability of production, future prices of crude oil and natural gas, operating costs, well abandonment and salvage values, royalties and other government levies that may be imposed during the producing life of the reserves. These assumptions were based on price forecasts prepared by GLJ for use as at the dates of these reports and many of these assumptions are subject to change and are beyond the control of the company. Details of these assumptions will be contained in the company's Annual Information Form for the year ended December 31, 2008. Actual production, sales and cash flows derived therefrom will vary from the evaluation and such variations could be material. The present value of estimated future net cash flows referred to herein should not be construed as the current market value of estimated crude oil, NGL's and natural gas reserves attributable to the company's properties.


Due to 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. Forward looking information 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.



For further information: R. A. Gusella, Executive Chairman, Or Gary D. Wine, President and Chief Operating Officer, Petrolifera Petroleum Limited, Phone: (403) 538-6201, Fax: (403) 538-6225, www.petrolifera.ca, inquiries@petrolifera.ca

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