Petrolifera provides operational update

Petrolifera provides operational update, comments on recently proposed changes to Argentina export tax

08:36 EST Monday, November 19, 2007

    <<    -   New Sierras Blancas natural gas discovery at 1050 well    -   New pool Loma Montosa crude oil discovery at 1006 well    -   New zone flowing light crude oil at 1028 well    >>

CALGARY, Nov. 19 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) announced today that it has made a Sierras Blancas natural gas discovery on its Puesto Morales Concession in the Neuquén Basin, Argentina; has made a new pool crude oil discovery in the Loma Montosa Formation on the Block at its 1006 well; and has completed a new zone in the Centenario Formation in its 1028 well which flowed light crude oil at 410 bbl/d.

The 1050 well, situated southwest of the northern lobe on the Puesto Morales Block in Argentina, tested natural gas with condensate through an 8 mm choke at a rate of approximately 2.4 mmcf/d with 14 bbl/d of condensate, increasing to 6.5 mmcf/d with 37 bbl/d of condensate through a 16 mm choke. The calculated absolute open flow (AOF) was 7.5 mmcf/d with some reservoir constraints indicated. The well will be tied into the company's new high pressure natural gas line in the next several weeks.

The 1006 well, situated in proximity to the La Ramona well, which was the first modern well drilled on the block several years ago, recently flowed light gravity crude oil at a rate of 350 bbl/d from zone LM9 in the Loma Montosa Formation. Results were obtained after a frac of the zone, and proved up the presence and productivity of this zone, which to date had only been completed in structurally higher positions for natural gas. Follow up drilling and testing is underway at other nearby locations.

The company also recently completed a new upper zone in the Centenario Formation in the 1028 well, located on the eastern edge of the Puesto Morales Block. This was undertaken after the initial productive zone started to produce at higher water cuts; the new zone has commenced flowing light gravity crude oil at a rate of 410 bbl/d.

Petrolifera continues to drill actively in Argentina with four rigs and four service rigs operating on its Puesto Morales/Rinconada Concession. Seismic acquisition has commenced on the company's Gobernador Ayala II concession in La Pampa Province, Argentina. Additional 3D seismic programs are scheduled early next year on the Vaca Mahuida and Puesto Guevara Concessions in the Province of Rio Negro. The company's new field facilities are anticipated to be completed shortly, including the water treatment plant, initiation of the planned waterflood at the northern and central lobe and commencement of deliveries of high pressure natural gas through the new pipeline built from Puesto Morales to Medanito. Petrolifera anticipates that by year end it will have invested over C$90 million during 2007 in Argentina and has established a preliminary budget of C$76 million for 2008.

Recently, the Government of Argentina introduced an increase in the export tax for crude oil and refined products which has the effect of setting a limit on the realizable price for crude oil sold within the country. While the tax on crude oil exports raises little in the way of revenue for the state, it does result in a subsidy for consumers. The company is still analyzing the full impact of the increased tax, which appears to set a ceiling of approximately US$42 on the price of a barrel of light crude oil. With assumed sales of 10,000 bbl/d, after taking into account the lower income taxes which would be payable to the government and lower royalties which would be payable to the host Provinces due to the price reduction, it appears there would be an approximate eight percent reduction in the company's cash flow from operations before changes in working capital ("cash flow") at these assumed sales levels, referencing the current level of actual selling prices and netbacks which have been achieved by Petrolifera thus far in 2007. Accordingly, Petrolifera will be reexamining its previously announced capital budget to determine which, if any, of its anticipated 2008 Argentinean projects will have to be deferred or eliminated due to the lower level of anticipated cash flow relative to its actual and forecast sales levels anticipated to be achievable during the year.

In Peru, progress continues on the company's 2D seismic acquisition on Ucayali Block 107.

The program continues on schedule with completion still anticipated for late February to early March 2008.

Work continues on securing EIA approval for the Maranon Block 106 program. Efforts are also progressing with respect to securing a heli-transportable rig capable of drilling to approximately 14,000 feet for the first of several anticipated wells during the latter half of 2008 and into 2009.

Work on the Colombian blocks primarily consists of ongoing evaluation of all available technical data in preparation for geophysical activity in 2008 and for drilling on the Sierra Nevada I license in the second half of next year.

Petrolifera Petroleum Limited is a public Canadian crude oil and natural gas company engaged in exploration, development, production and sales of crude oil and natural gas in Argentina, while advancing its exploration plans in both Colombia and Peru, where it holds extensive and prospective acreage. This balanced and diversified exposure mitigates the company's overall risk profile. The company's common shares are listed for trading on the Toronto Stock Exchange under the symbol PDP.

For further information: R. A.Gusella, Executive Chairman, Petrolifera Petroleum Limited, Phone (403) 538-6202, Fax (403) 538-6225, inquiries@petrolifera.ca; www.petrolifera.ca

© Copyright Canada Newswire

Bad Day Ahead...Due To Citibank

Citigroup under pressure in pre-market

Monday, November 19, 2007

Citigroup has slid nearly 3 per cent in pre-market trading on Monday after Goldman Sachs downgraded the stock to its “Americas sell list” from “neutral,” warning of many industry- and firm-specific challenges in the next six months, which will ultimately drive the No. 1 U.S. bank’s underperformance relative to its peers.

Goldman assumes Citi will take an $11-billion (U.S.) write-off in the fourth quarter of 2007, at the high end of the bank’s guidance, and also an additional $4-billion write-off in the first quarter of 2008 on its remaining subprime and collateralized debt obligations portfolios.

The brokerage also cut its price target on Citigroup $33, dropping its 2008 and 2009 earnings estimates to $3.80 a share and $4.60 a share, from $4.65 and $5.20, respectively.
Citi shares are changing hands at $33.08, down from Friday’s NYSE close of $34.

© Copyright The Globe andMail

Oil prices rise as OPEC weighs dollar impact

PABLO GORONDI

Monday, November 19, 2007

Oil prices rose Monday with more talk among OPEC members about converting their cash reserves to the euro and away from the U.S. dollar.

There is also doubt a possible OPEC output hike next month would get more supplies to market in time for the northern winter.

Fresh purchases of the new Nymex expiry — the December contract expired Friday — were also behind some of the gains.

Light, sweet crude for January delivery rose 81 cents to $94.65 (U.S.) a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract rose $1.77 to settle at $93.84 a barrel on Friday.

In London, January Brent crude futures added 53 cents to $92.15 a barrel on the ICE Futures exchange.

New comments about the dollar arose during a weekend summit, where the heads of state of the Organization of Petroleum Exporting Countries sought to find ways to mitigate the adverse impact the battered U.S. currency has had on revenues.

Oil is priced in U.S. dollars and the currency's depreciation has contributed to rising crude prices and eroded the value of dollar reserves. Cartel officials have resisted pressure to increase oil production to ease prices.

“The fact that the OPEC members are talking about issues like the weak U.S. dollar and not talking about raising output is supportive of strong pricing and so we're seeing signs of the market gaining strength,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Iranian President Mahmoud Ahmadinejad, in Riyadh, Saudi Arabia, called the dollar a “worthless piece of paper,” and said the cartel's members have expressed interest in converting cash reserves into a currency other than the U.S. dollar — a sentiment echoed by Venezuelan President Hugo Chavez, who called the euro a better option.

There had been speculation over whether OPEC would raise production at the meeting following recent oil price increases that have closed in on $100 a barrel. U.S. Energy Secretary Samuel Bodman had called on OPEC to raise output last week, but cartel officials say they will hold off any decision until the group meets next month in Abu Dhabi in the United Arab Emirates.

Some analysts say a decision to increase output next month is unlikely to strengthen supplies to meet peak winter demand season.

“Even if the OPEC ministers decide to raise output in early December, that would likely become effective only in January so by the time the oil gets to the market, the winter season would essentially be over,” Mr. Shum said.

OPEC officials have also cast doubt on the effect any output hike would have on oil prices, saying the recent rise has been driven by the falling dollar and financial speculation by investment funds, rather than any supply shortage.

In other Nymex trading, heating oil futures gained 1.79 cents to $2.6050 a gallon while gasoline futures added 1.56 cents to $2.3910 a gallon.

Natural gas futures jumped 7.2 cents to $8.073 per 1,000 cubic feet.

Could yuan spell relief for sky-high dollar?

SHAWN McCARTHY

Sunday, November 18, 2007

OTTAWA — China's growing inflation problem may represent one of the best hopes that Canadian manufacturers and other exporters have for some relief from a sky-high loonie.

While the Bank of Canada grapples with inflationary pressures that could preclude a significant cut in interest rates – which would take pressure off the dollar – China may be forced to increase the value of its currency to combat inflation.

At a meeting in South Africa this weekend, finance ministers and central bankers from 20 leading nations expressed concern about a slowdown in global economic growth even as food and energy prices rise sharply around the world.

The financial leaders warned that turbulence in currency and financial markets will continue over the medium term as the global economy copes with near-record oil prices, rapid Asian growth and a slowdown in the United States, and a global credit crunch sparked by the crisis in the U.S. subprime mortgage market.

As he has in the past, Finance Minister Jim Flaherty urged China to boost the value of the yuan, arguing that Canada has borne an undue proportion of the burden from a skidding U.S. dollar while China's fixed-rate currency has sheltered its export-oriented economy.

Other finance ministers echoed his call – as did the managing director of the International Monetary Fund, though not as bluntly aimed at China. But while China is unlikely to respond to external pressure, it has pressing domestic reasons to boost the value of its currency.

In a weekend conference call from the resort Kleinmond, Bank of Canada Governor David Dodge said the Chinese central bank governor noted the Asian giant is experiencing an uncomfortable rate of increase in consumer prices.

China has tried without much success to slow the growth rate of its red-hot economy, and may have to resort to currency appreciation to slow down its export growth and take pressure off imported energy and food prices.

“It's very much in their interest [to increase the value of the yuan] because inflation is a huge political as well as economic problem for them,” Mr. Dodge said. “It's very much in their interest to follow policies to deal with their own domestic issue, and that at the moment is inflation.”

Don Drummond, chief economist for the Toronto-Dominion Bank, said consumer prices are rising at a 6-per-cent clip in China, while its U.S. dollar reserves are growing to worrisome levels.

So while China is unlikely to respond to hectoring from countries such as Canada, it may act on its own. Such a move would take pressure off a handful of free-floating currencies, including those of commodity-based economies such as Canada, Australia, South Africa and Brazil.

The G20 finance leaders warned that the twin currency and financial volatility is not likely to calm down soon, and will likely result in slower global growth.

Mr. Dodge said the Bank of Canada would respond to those factors, which are more worrisome than they were even a month ago. Many economists expect the central bank to begin cutting rates to reflect the higher value of the loonie and the slower growth expected in the United States, Canada's largest export market.

Last week, Merrill Lynch Canada Inc., J.P. Morgan Securities Canada Inc., and the Royal Bank of Canada forecast the central bank would cut its trendsetting rate next month, but CIBC World Markets and TD Bank were more circumspect.

TD's Mr. Drummond said the Canadian economy has been growing at an unsustainable rate and Mr. Dodge had been poised to raise rates before the credit crunch escalated in the United States this fall and the loonie shot well above $1 (U.S.).

Despite the credit and housing market problems, even the U.S. economy is expected to maintain 2-per-cent growth next year, after a fairly robust 2007. Fuelled by stronger exports – reflecting a sharply devalued dollar – the U.S. economy grew at a 3.9-per-cent clip in the third quarter.

Unless the Canadian dollar climbs back toward its high-water mark of $1.10 or the American economy does a swan-dive, the Bank of Canada is likely to stand pat on interest rates, Mr. Drummond said.

© Copyright The Globe and Mail

PDP Takes A Hit On Argentia Increased Taxes

OUCH!