Petro-Reef Releases Q1 Financial Results

CALGARY, ALBERTA--(Marketwire - June 30, 2011) - Petro-Reef Resources Ltd. (TSX VENTURE:PER)

Petro-Reef Resources Ltd. has released its first quarter 2011 results. Full financial details are contained in the financial statements and management's discussion and analysis filed on SEDAR.

For the three months ended March 31, 2011, the company produced an average of 807 barrels of oil equivalent per day (boe/d) comprising 296 bbl/d of oil and natural gas liquids and 3,064 mcf/d per day of natural gas. The company received an average of $75.14 per barrel for oil and $4.06 per thousand cubic feet for natural gas. Field netbacks averaged $26.69/boe and corporate netbacks averaged $22.50/boe.

Total revenue decreased 0.6% to $3,122,279 for the three month period ended March 31, 2011 compared to $3,142,052 for the same period ended March 31, 2010. Petro-Reef realized a combined price per boe for the three month period ended March 31, 2011 of $42.99 representing a 21.3% increase compared to the realized price per unit of production of $35.44 for the same period ended March 31, 2010.

For the three month period ended March 31, 2011, Petro-Reef generated cash flows from operations of $1,634,148 an increase of 9.3% compared to $1,495,231 for the three month period ended March 31, 2010 due to a higher crude weighting that provided higher netbacks than natural gas.

Three Months ended March 31		2011				2010
Net Income (Loss) For The Period	$	(1,053,595	)		$	439,893
Deferred income tax expense (recovery)		239,892				(608,993	)
Other income		(250,919	)			(173,663	)
Unrealized loss (gain) on risk management contracts		903,673				(1,296,583	)
Accretion Expense		16,943				15,935
Stock-Based Compensation		140,536				65,026
Depletion And Amortization		1,637,618				1,836,630
Cash Flow From Operations	$	1,634,148			$	1,495,231

Petro-Reef's bank debt and working capital deficit at March 31, 2011 was $12,458,134 compared to $10,560,062 at December 31, 2010. Included in the working capital deficit was $10,099,856 in outstanding bank lines of credit which is included in current liabilities. As at March 31, 2011, Petro-Reef's bank credit facility was structured as a $15,000,000 revolving operating demand loan and a $1,000,000 non-revolving acquisition / development demand loan.

	March 31, 2011			December 31, 2010
Bank debt	$	10,099,856		$	9,627,691
Bank debt and Working capital deficit (1)	$	12,458,134		$	10,560,062
Oil and Gas properties	$	33,943,968		$	31,947,074

1. Excluding risk management contract liabilities and flow through share premium liability

In June, 2011 the Company renewed its credit facilities as follows:

Facility A - revolving operating demand loan with a maximum limit of $11,000,000.

Facility B - non-revolving acquisition/development demand loan that provides an additional $6,000,000 of financing.

Interest is at prime plus 1.0% per annum for Facility A and prime plus 1.5% per annum for Facility B.

Capitalized resource properties as at March 31, 2011 were $33,943,968 net of accumulated depletion, compared to $31,947,074 as at December 31, 2010. For the three month period ended March 31, 2011 Petro-Reef incurred $3,616,000 in net capital expenditures.

Capital expenditure summary:

Area	Description	Expenditures
Alexander, Alberta	Drill and complete	$	1,866,415
Alexander, Alberta	Land		85,506
Alexander, Alberta	Facilities		84,939
Goose River, Alberta	Drill and complete		1,547,045
Goose River, Alberta	Land		22,001
Miscellaneous	Other		10,094
Total		$	3,616,000

Financial and Operational summary

				Three Months Ended March 31
				2011			2010			% Change
FINANCIAL
Oil and gas revenue				3,122,279			3,142,052			(0.6	)
Cash flow from operations (1)				1,634,148			1,495,231			9.3
	Per share - basic			0.03			0.04			(25.0	)
		-diluted		0.03			0.04			(25.0	)
Net income (loss)				(1,053,595	)		439,893			(340.1	)
	Per share - basic			(0.02	)		0.01			-
		-diluted		(0.02	)		0.01			-
Total bank debt				10,099,856			13,430,388			(24.8	)
Capital expenditures				3,616,000			1,780,000			108.1
Shares outstanding - end of period				56,261,477			39,156,241			43.7
OPERATIONAL
Wells drilled (net)
	Oil			2.6			0.0			-
	Gas			0.0			0.0			-
	Dry			0.8			0.0			-
Total net wells drilled				3.4			0.0			-
Daily production (2)
Oil and NGLs (bbl/d)				296			137			116.1
Natural gas (mcf/d)				3,064			5,091			(39.8	)
Oil equivalent (boe/d @ 6:1)				807			985			(18.1	)
Realized commodity prices ($CDN)
Oil and NGLs (bbl)				75.14			75.44			(0.4	)
Natural gas (mcf)				4.06			4.72			(14.1	)
Oil equivalent (boe @ 6:1)				42.99			35.44			21.3
Operating netback ($/boe) (1) (2)
Revenue				42.99			35.44			21.3
Realized gain (loss) on risk management contracts				2.41			(0.93	)		(359.1	)
Royalty				(7.06	)		(4.04	)		74.8
Operating cost				(11.65	)		(7.88	)		47.8
Operating netback per boe				26.69			22.59			18.1
General and administrative				(2.82	)		(3.99	)		(29.3	)
Finance expenses				(1.37	)		(1.74	)		(21.3	)
Cash flow from operations per boe				22.50			16.87			33.4

(1) Funds from operations, funds from operations per share, operating netbacks and cash flow per barrel of oil equivalent are not defined by generally accepted accounting principles in Canada and are regarded as non-GAAP measures. Funds from operations and funds from operations per share are calculated as cash provided by operating activities before changes in non-cash working capital, and decommissioning obligations settled. Funds from operations are used to analyze the company's operating performance and the ability of the business to generate the cash flow necessary to finance future growth through capital investment and to repay debt. Funds from operations do not have a standardized measure prescribed by GAAP and therefore may not be comparable with the calculations of similar measures for other companies. The company also presents funds from operation per share whereby per share amounts are calculated using the weighted average number of common shares outstanding consistent with the calculation of net income or loss per share.

(2) 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.