Production
Petrolifera's sales grew considerably during 2007. All sales were of production in Argentina. Crude oil sales increased 45 percent over 2006 levels, to average 8,657 barrels per day. Much of the improvement occurred during the early part of the year, when flush production from new Sierras Blancas discoveries at Puesto Morales contributed to record quarterly sales, cash flow from operations before changes in working capital and near-record earnings. Subsequently, production curtailments for natural gas conservation purposes, water incursion at a key high productivity well (1013), pressure depletion awaiting the waterflood and delays and equipment shortages affected production levels.
Natural gas sales were stronger at modestly better prices during 2007, awaiting the startup of the waterflood and completion of the company's high pressure natural gas pipeline to Medanito. Sales rose 97 percent to average 2.3 mmcf/d in 2007.
On an equivalent basis, Petrolifera's 2007 sales rose 47 percent to average 9,047 boe/d compared to only 6,171 boe/d in 2006, the company's first full year of operations. Again, full year results were reflective of the influence of oil production declines during the year, awaiting activation of the company's pressure maintenance scheme which is now underway. Fourth quarter sales were 7,042 boe/d, slightly below third quarter for similar reasons. During November, production was curtailed due to field activities associated with the startup of certain key facilities, pump installations and the like, well in excess of the impact of natural declines. This was evidenced by the fact that December sales exceeded November levels by 23 percent and early January 2008 levels were even higher.
Reserves
Petrolifera's proved reserves ("1P") of crude oil, natural gas liquids and natural gas increased 38 percent during 2007 to reach 17.8 million boe at December 31, 2007. Proved and probable reserves ("2P") improved modestly to 25.6 million boe after record production of approximately three million boe during the year. In 2007, reserves also had 3P reserves estimated for the first time since 2005, when it was undertaken by a different evaluator. A total of 13.5 million boe of possible reserves were identified, bringing 3P reserves to a total of 39 million boe. When combined with production of 2006 and 2007, Petrolifera's Puesto Morales Norte field and surrounding areas appears to be an accumulation with recoverable 3P reserves of approximately 45 million boe, a significant accomplishment in any basin, but particularly so in the Neuquén Basin, as it is considered mature by industry standards.
Petrolifera Petroleum's proved oil reserves increased 72 percent during 2006 to 10.3 million barrels, after production of approximately 1.5 million barrels through October 31, 2006. Proved natural gas reserves increased 544 percent to 18 Bcf during this same period, after production of approximately 335 mmcf of natural gas. On a barrel of oil equivalent (boe) basis, using a conversion rate of six mcf per barrel of crude oil, Petrolifera's proved reserves, after production, are estimated to have increased 106 percent during the year to 13.3 million boe.
