Pearl Exploration and Production Ltd. - San Miguel, Texas


	Overview U.S. San Miguel, Texas Fiddler Creek, Montana Canada Reserves Quarterly Production Operational Updates 2008 Operations & Production Guidance Heavy Oil Basics		San Miguel, Texas Pearl (through its wholly-owned subsidiary, Newmex Energy (USA) Inc.) is a 50% participant in the development of a large, shallow depth, heavy oil deposit located in the Maverick Basin in southern Texas. Under the terms of the Participation Agreement between Pearl and The Exploration Company of Delaware Inc. ("TXCO"), a San Antonio based oil and gas company, Pearl and TXCO each own a 50% working interest in certain leases and have agreed to jointly develop the leases, together with any additional leases acquired within the area of mutual interest described in the Participation Agreement, for the production of heavy oil and other hydrocarbons. The San Miguel heavy oil project focuses on the San Miguel sandstone which is a large, well defined heavy oil deposit that contains an estimated two to three billion barrels of oil-in-place (1 to 1.5 billion net to Pearl). Pearl and TXCO operated a cyclic steam pilot in 2006 - 2007 and determined that cyclic steam was not economically viable. However, the data gathered, combined with data acquired in historic San Miguel pilots, provides a strong indication that SAGD will be economic. Pearl and TXCO are currently converting the cyclic steam pilot to a SAGD pilot. In addition, along with the conversion of the cyclic steam pilot to a SAGD pilot, a second, larger production pilot to the north of the existing facility is being developed. The second pilot is expected to be operational in the second half of 2008. Operational Updates