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Petrolifera to begin La Pinta testing on June 6

2009-06-05 09:12 ET - News Release

Mr. R. A. Gusella reports

TESTING OF PETROLIFERA'S LA PINTA WELL IN COLOMBIA TO COMMENCE JUNE 6, 2009; DEADLINE FOR ARGENTINA BIDS EXTENDED TO JULY 10, 2009 AT REQUEST OF PROSPECTIVE PURCHASERS

Petrolifera Petroleum Ltd.'s testing of its La Pinta No. 1 well on the Sierra Nevada licence in Colombia is anticipated to commence on June 6, 2009.

It is expected that the complete testing program will require between seven and 10 days, after which the rig will be released from the La Pinta No. 1 location. Results will be communicated by way of press release when they are conclusive and testing is completed.

The company also announced that at the request of a number of interested parties, the deadline for submission of bids related to the potential purchase of Petrolifera's Argentinian operations has been extended until July 10, 2009.

We seek Safe Harbor.

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55 Million Shares

ARGENTINA Assets:

Petrolifera had a busy and productive first quarter of 2009 in Argentina. The principal event was the decision taken to initiate a process to dispose of the company’s Argentinean operations. This decision was not taken
lightly as Petrolifera had fared well in Argentina, while clearly being a strong corporate citizen during an approximate four year period from 2005 to the present. During this time, the company made a number of significant discoveries which added considerable reserves, production and sales. These also resulted in the
payment of considerable royalties and income taxes during this period. We also enhanced shareholder value and our success in Argentina and strong reinvestment program contributed to job and wealth creation for the Province of Rio Negro and the Country of Argentina. Nevertheless, with worldwide capital sources now constrained and numerous prospects of greater magnitude available to Petrolifera in Peru and Colombia, we determined an exit was the best alternative at this time, provided a suitable and fair price could be secured from a purchaser intent on recognizing and realizing the remaining considerable potential of Petrolifera’s holdings in
the country.

We retained Tristone as our advisor in the process and anticipate opening the data room in mid-May 2009 and receiving proposals on or about June 18, 2009. Thereafter offers will be assessed and with Tristone’s assistance,
we will determine which, if any, of the submissions meet our objectives.
We are hopeful the operations can be sold as a going concern in order to maximize employment opportunities for our Argentinean staff, both in Buenos Aires and in the field at Puesto Morales Norte. We also anticipate that
our recent success at Gobernador in identifying what could prove to be a significant heavy oil resource (approximately 19 degree API crude oil) will influence the sales process.

Mortgage rates set to rise again

Soaring bond yields are setting the stage for a second round of interest rate hikes on residential mortgages in about a week.

After nudging rates higher on longer-term mortgages last Wednesday, Toronto-Dominion Bank is once again raising borrowing costs on its popular five-year, fixed-rate loan. Effective tomorrow, the posted rate on that mortgage moves 40 basis points higher to 5.85 per cent.

Last week, TD and the other banks increased their respective interest rates on five-year, fixed-rate mortgages by 20 basis points to 5.45 per cent.

While no major competitor had announced plans to follow TD's latest increase by late today, experts suggested that higher mortgages rates are likely inevitable since banks are facing higher borrowing costs on the bond market. Banks tap the bond market to finance mortgages because they lend out more money than they attract through deposits.

"We don't have a fully-matched book and I would guess that none of the Canadian banks have a fully-matched book in terms of deposits matching loans," said Joan Dal Bianco, vice-president of real estate secured lending for TD Canada Trust.

While mortgage rates rose slightly last week, that move was insufficient to offset the bank's higher costs because bond yields have climbed higher since that time. "And unfortunately, we're now having to cover that gap, or at least close it a little bit," Dal Bianco said.

When asked if consumers should expect even more mortgage rate increases, she replied: "I think we're going to see, over the next year, lots of changes as the economy starts showing positive signs."

The recent spike in bond yields is a global phenomenon and the increase in Canadian yields has actually been milder compared to other countries, said Doug Porter, deputy chief economist at BMO Capital Markets.

The main reason that yields are rising is because the bond market is beginning to price in the prospect of an economic recovery later this year or next year. Said Porter: "I guess that's the good news part of the story. The bad news is that there is actually a cost for the economy in terms of raising the cost of money for some borrowers."

To a lesser degree, longer-term yields are also rising because the bond market is worried about the future prospects for inflation as governments around the world issue massive amounts of debt to stimulate economic growth.

Porter, however, also noted that home sales have "perked up" a bit in the last couple of months, fuelling more consumer demand for mortgages. "That's probably played a small role in this rise in mortgage rates as well," he said.

While TD is certainly experiencing increased demand for mortgages, Dal Bianco insisted that factor played no role in the rate change. "It is strictly the bond market," she said.

Five-year, fixed-rate mortgages are traditionally the most popular option for homeowners. Nonetheless, Mark Chandler, a senior fixed income analyst RBC Capital Markets, said consumers should remember that longer-term mortgage rates are still sitting at near-historic lows.

"The hope that you can do better than that - or even maintain that for an extended period of time - that may be hoping for a little too much, really."