Petrolifera Confirms Its Financial Integrity as Capital Markets Deteriorate

Petrolifera Confirms Its Financial Integrity as Capital Markets DeterioratecnwCALGARY, Oct. 9 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) wishes to comment on recent share price movements, capital and credit markets and current activity being conducted by the company.ARGENTINA AND FINANCIAL MATTERS

The company wishes to confirm that during the months of July and August in the third quarter 2008 its production has been relatively stable at approximately 8,000 boe/d, similar to levels reported for the second quarter 2008. 47.00 per barrel coverted becomes $49.87 per barrel when translations of the US dollar

There were some minor crude oil production declines in September 2008 due to adjustments being made in the Puesto Morales Norte Field with respect to pumping systems designed to handle the changing fluid mix with the water injection that is occurring at the present time as part of the waterflood program. These changes to extraction rates are expected to restore production rates in the fourth quarter in line with expectations of the impact of the waterflood as contained in our recent Fall 2008 Corporate Presentation, which is posted on our website at www.petrolifera.ca. We would note that the expected waterflood impact is occurring, offsetting normal declines that arise from the production process. We are awaiting final September natural gas sales levels and we will be reporting to our shareholders our Third Quarter 2008 operating and financial results on November 11, 2008 when our Board of Directors will convene to review these results and the company's 2009 operating and financial plan and budget.Prices have been stable in Argentina for crude oil, albeit at much below world prices, especially as has been the case since last December 2007, when the imposition of increased export taxes reduced the effective wellhead price to US$42 per barrel. This price was subsequently negotiated up to $47 per barrel without any concessions from the governing authorities.

It should also be noted that as the Canadian dollar has weakened recently, our realized price in August 2008, for example, was $49.87 per barrel when translations of the US dollar, the Argentinean peso and the Canadian dollar were incorporated into Canadian dollar reporting, which is used in Petrolifera's financial statements. All of Petrolifera's production occurs in Argentina.Operationally, we are conducting drilling operations in Argentina using one drilling rig and one service rig at the present time.

Presently, we are testing an exploratory well on Vaca Mahuida which encountered live 29 degree API oil during drilling and initial swab tests. A number of hydraulic fracs will be conducted over several intervals to determine well productivity from identified shallow Centenario sandstone reservoirs at around 800 meters subsurface. The Centenario was the primary objective of this well, labeled VM 2007. Should this well prove commercial, management anticipates early production with good follow-up potential.

Petrolifera also has another well, VM 2001, standing cased awaiting testing on the Vaca Mahuida block. The company has an effective 75 percent working interest in this project.The lone drilling rig under contract presently is drilling an exploratory well to evaluate a Centenario/Basement play on the Rinconada Norte block northeast of Puesto Morales. This is also a shallow test and the well is likely to be cased for further evaluation based on live oil shows while drilling.

The rig is scheduled to return to Puesto Morales to drill two low-risk infill wells within the Puesto Morales Field for additional near-term deliverability. These are the type of Argentinean programs and drilling Petrolifera anticipates pursuing during the next several months until further price increases or increased investment incentives emerge in that economy and more particularly until credit and capital markets stabilize or improve.Petrolifera is currently generating a healthy net operating income from its production base in Argentina. On a preliminary basis, before review by Petrolifera's auditors and the company's Audit Committee and Board of Directors, cash flow from operations before changes in working capital ("cash flow") has been exceeding monthly average cash flow reported for the second quarter of 2008. First half of 2008 cash flow and other financial results were previously reported to capital markets in August 2008.

The company is striving to reduce cash outlays to be more aligned with internally generated funds to maintain its excellent balance sheet and financial flexibility as it prepares for increased activity in Colombia and Peru.

As at August 31, 2008, Petrolifera only had $4 million of net debt, including other long term investments and assuming the asset backed commercial paper ("ABCP") resolution is completed shortly, the notes arising from the resolution are issued and the company is able to finalize a negotiated long-term credit facility, secured by the notes to be issued to replace ABCP owned by the company.

This was offered to Petrolifera by a Canadian chartered bank for approximately the equivalent of the carrying value of the ABCP on our balance sheet and would further enhance corporate liquidity. There can be no assurance that this proposed resolution and term credit facility will be finalized.In the meantime, at August 31, 2008 the company had approximately a $25 million surplus of available long-term reserve backed credit available to supplement its internally generated cash flow and with the ABCP resolution, would have access to another approximately $10 million which could become available on a long term basis, which would further improve reported working capital as all debt related to ABCP would be classified as long term. Working capital at August 31, 2008 was $11.8 million, including $16.6 million of cash and after provision for $16 million of short term borrowings which, as indicated above, would become long term debt under the ABCP resolution and finalization of the amended bank credit facility.COLOMBIAIn Colombia, Petrolifera has prepared the surface location and access road for the La Pinta well scheduled to commence drilling this year on the Sierra Nevada license in the Lower Magdalena Basin. A suitable helicopter transportable drilling rig was located in Ecuador and mobilized to Colombia where it is currently be being refurbished prior to its relocation to the La Pinta drill site.

This will occur as quickly as possible to meet the license's requirements. Thereafter a La Pinta follow-up well if warranted by success or drilling of the Brillante prospect on the same license is anticipated in 2009.A 120 square kilometer 3D seismic program on the Turpial license in the Middle Magdalena Basin is scheduled to commence shortly.PERUThe company continues to evaluate and interpret the results of its extensive 2D seismic program over Ucayali Block 107 in Peru.

We remain optimistic about the hydrocarbon potential of this block.The establishment of a seismic base camp and the line surveying program on Maranon Block 106 in northern Peru is underway following receipt of approval of the Environmental Impact Assessment conducted over the past year.Petrolifera's award of Block 133 offsetting Block 107 is awaiting Presidential decree later this year.GENERALWe remain mindful of the difficult credit and capital market conditions throughout the world, including in certain countries in South America. Over the near term, we intend to conduct a prudent program focusing on risk reduction to maintain financial strength and integrity.

This will be reflected in our proposed 2009 operating and financial plan and capital budget which will be tabled with our Board of Directors in mid-November 2008. We will endeavor in the appropriate circumstances to introduce joint venture partnerships to facilitate risk mitigation. We will also manage the timing of significant outlays while meeting obligations to ensure to the extent possible the significant participation by our shareholders in the upside potential of the oil and gas properties and assets we have secured over the past several years. We will also continue to examine new opportunities to expand and diversify the company's exposure in Latin America under the direction of our strengthened technical staff with an emphasis on lower risk opportunities which can be managed in conjunction with our risk averse approach.We are of the opinion that our shares are undervalued in relation to the net asset value of the company and that capital market forces, including the impact of the share price falling under marginable levels as set by banks and other lending institutions, have adversely and unduly influenced the price of our common shares in the stock market.

This share price deterioration has also occurred for most junior Canadian oil companies engaged in international activity, regardless of financial or operating results, apparently due to the desire of many investors to sell in a search for cash or immediate liquidity in a flight to perceived quality. We also understand concerns about the risk of declining commodity prices arising from the credit crisis and the potential impact on economic activity throughout the world has led to high levels of redemptions among mutual funds holding the shares of energy companies.

These forces have overridden fundamentals and adversely affected our share price as well.We would also remind investors and shareholders that as we do not presently receive world prices for our production in Argentina, due to that country's export tax policy, we are accordingly not exposed to declining oil prices impacting on our cash flow from operations until WTI reaches a level of approximately $61 per barrel.