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Petro-Reef Resources Ltd
Symbol PER
Shares Issued 56,261,477
Close 2011-07-06 C$ 0.28
Market Cap C$ 15,753,214
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Petro-Reef's 102/10-7-56-26W4 produces 294 bpd

2011-07-07 12:39 ET - News Release

Mr. Hugh Thomson reports

PETRO-REEF ANNOUNCES PRODUCTION UPDATE

Petro-Reef Resources Ltd. 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 per cent of the load fluid) the well produced at an average rate of 294 barrels per day of 32-degree American Petroleum Institute (API) sweet oil and 213,000 cubic feet 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/d consisting of 89 bbl/d of oil (70 bbl/d net) and 177,000 cubic feet per day of gas (140,000 cubic feet per 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 undrilled location has been identified on the same lands that is prospective for the Alexander sand.

Petro-Reef is presently producing 726 boe/d consisting of 174 bbl/d of oil and natural gas liquids and 3,311,000 cubic feet per 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 160,000 cubic feet 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 467,000 cubic feet 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/d (40 per cent oil and 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)      Natural gas)   Total (boe/day)
                               (bbl/day          (mcf/day                   

Current net production              174             3,311               726 
Tie-in 13-7-56-26W4                  65               300               115 
Tie-in 102/10-7-56-                  70               140                93 
 26W4                                                                       
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 1,366,000 cubic feet per day of natural gas. The company expects the well to produce at an initial rate of 146 boe/d consisting of 82 bbl/d of oil (65 bbl/d net) and 378,000 cubic feet per day of gas (300,000 cubic feet per 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.

We seek Safe Harbor.

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