Petro-Reef Resources Ltd.
TSX VENTURE : PER

Petro-Reef Resources Ltd.

July 07, 2011 12:34 ET

Petro-Reef Announces Production Update

CALGARY, ALBERTA--(Marketwire - July 7, 2011) - Petro-Reef Resources Ltd. (TSX VENTURE:PER) has recently completed and fractured the 102/10-7-56-26W4 well in the Alexander sand zone. In 6.7 hours of swabbing operations (after recovering 100% of the load fluid) the well produced at an average rate of 294 barrels per day of 32° API sweet oil and 213 mcf per day of natural gas or approximately 329 barrels of oil equivalent per day. The Company expects the well to produce at an initial rate of 118 boe/day consisting of 89 bbl/day of oil (70 bbl/day net) and 177 mcf/day of gas (140 mcf/day net). Petro-Reef has a 79-per-cent working interest in the 10-7 well.

The 102/10-07 well is a follow-up to the discovery well at 11-07-56-26W4 which produced 5,414 barrels of oil in 212 days from this same zone before being shut-in, in favour of producing oil from the Detrital oil zone. The Alexander Sand is the second oil producing zone in Section 7-56-26W4. Three existing wells at 11-07-56-26W4, 13-07-56-26W4 and 06-07-56-26W4 are all completed in the Detrital oil zone and all three wells also contain the same Alexander Sand, as identified on well logs. All three locations are good candidates for additional vertical wells, targeting oil in the Alexander sand. In addition, a fourth un-drilled location has been identified on the same lands that is prospective for the Alexander sand.

Petro-Reef is presently producing 726 boe/day consisting of 174 bbl/day of oil & ngl and 3,311 mcf/day of natural gas. This total includes the two new wells at 2-1-56-27W4 and 8-7-56-26W4 brought on-stream in the past 30 days.

The 2-1 well was perforated and fractured in the Calahoo zone and is producing an average of 45 barrels per day (bbl/d) of oil and 160 mcf per day of natural gas. Petro-Reef has a 94-per-cent working interest in the 2-1 well.

The 8-7 is producing as a gas well at a rate of 467 mcf per day from the Lower Detrital zone. Petro-Reef has a 100 per-cent working interest in the 8-7 well.

Petro-Reef anticipates its daily production rates will increase to over 1,100 boe/day (40% Oil & NGL) with new wells being tied-in and brought on-stream in August, 2011, and GPP (Good Production Practices) production restrictions on 6-7-56-26W4 and 11-7-56-26W4 being lifted in late July, 2011.

Oil & NGL (bbl/day ) Natural gas (mcf/day ) Total (boe/day )
Current net production 174 3,311 726
Tie-in 13-7-56-26W4 65 300 115
Tie-in 102/10-7-56-26W4 70 140 93
GPP restriction lifted 150 450 225
Total net production 459 4,201 1,159
40 % 60 % 100 %

The previously announced 13-7-56-26W4 well was perforated and fractured in the Detrital zone and on a 40-hour test produced an average of 127 bbl/d of oil and 1,366 mcf per day of natural gas. The Company expects the well to produce at an initial rate of 146 boe/day consisting of 82 bbl/day of oil (65 bbl/day net) and 378 mcf/day of gas (300 mcf/day net). Petro-Reef has a 79-per-cent working interest in the 13-7 well.

In late April, 2011 the ERCB (Energy Resources Conservation Board) notified the Company that production rates at 6-7-56-26W4 and 11-7-56-26W4 would be restricted until a GPP application is approved. The application was submitted to the ERCB on May 19, 2011 and approval is expected in the next two to three weeks.

Also, Petro-Reef has licensed a well at 9-12-56-27W4M targeting the Detrital oil zone, and has received oil down-spacing approval from 160 acre to 80 acre spacing for the Lower Mannville oil zones on east half of section 12 -56-27W4M. The 9-12 well is expected to be drilled and completed in the next two months.

The term barrel of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of 6,000 cubic feet per barrel of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in the report are derived from converting gas to oil in the ratio mix of 6,000 cubic feet of gas to one barrel of oil.

Forward-Looking Statements: All statements, other than statements of historical fact, set forth in this news release, including without Limitation, assumptions and statements regarding reservoirs, resources and reserves, future production rates, exploration and development results, financial results, and future plans, operations and objectives of the Corporation are forward-looking statements that involve substantial known and unknown risks and uncertainties. Some of these risks and uncertainties are beyond management's control, including but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, environmental risks, industry competition, availability of qualified personnel and management, availability of materials, equipment and third party services, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by the Corporation at the time of preparation, may prove to be incorrect. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this news release.

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