Pearl Exploration and Production Ltd.

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  Sep 20, 2006 - 11:49 ET
Pearl Exploration And Production Ltd. Closes the Acquisition of Nevarro Energy Ltd.

  CALGARY, ALBERTA--(CCNMatthews - Sept. 20, 2006) - Pearl Exploration and Production Ltd. ("Pearl" or the "Company") (TSX VENTURE:PXX) and Nevarro Energy Ltd. ("Nevarro") (TSX VENTURE:NEL) are pleased to announce the closing on September 19, 2006 of the previously announced acquisition by Pearl of all of the issued and outstanding shares of Nevarro under a court approved Plan of Arrangement involving Pearl, Nevarro, Serrano Energy Ltd. ("Serrano") and the shareholders of Nevarro. At a special meeting of the shareholders of Nevarro held on September 19, 2006, the shareholders voted 99.94% in favor of the acquisition.

Nevarro is a junior oil and gas company focused on exploration in western Canada. The board of directors of both Pearl and Nevarro unanimously supported the transaction.

Under the terms of the Nevarro Plan of Arrangement, Nevarro shareholders will receive, at the election of the individual Nevarro shareholders, for each Nevarro share, either: (a) $1.875 in cash, 0.125 of a common share of Pearl (a "Pearl Share"), 0.5 of a common share of Serrano (a "Serrano Share") and 0.20866 of a common share purchase warrant of Serrano (a "Serrano Warrant"); or (b) 0.5 of a Pearl Share, 0.5 of a Serrano Share and 0.20866 of a Serrano Warrant. Based on the elections of Nevarro shareholders, a total of 1,637,126 Pearl Shares will be issued, and $23,764,556 in cash will be paid, to Nevarro shareholders. Nevarro is now a wholly owned subsidiary of Pearl and the shareholders of Nevarro are shareholders of Pearl and of Serrano. The total consideration for the acquisition is approximately $39.6 million.

Nevarro's production over the last month averaged approximately 1,100 barrels of oil equivalent per day ("BOE/d"). Exploration and development has continued on the Nevarro oil and gas assets since the transaction was mutually announced on June 28, 2006, and as a result Pearl will be tying in additional production of 300 BOE/d in the coming weeks. It is anticipated that by the end of 2006, the net production from the Nevarro oil and gas assets will be at 1,600 BOE/d which will be incremental to Pearl's production from its other oil and gas assets.

The estimated reserves acquired prior to the 2006 exploration and development activity noted above are based on an independent reserve evaluation prepared by independent reservoir engineers, DeGolyer and McNaughton Canada Limited as at December 31, 2005. These reserve estimates have been prepared utilizing definitions as set out under National Instrument 51-101.

"The acquisition of Nevarro is consistent with Pearl's strategic focus and will result in a substantial addition to our asset base in western Canada with more than 100 drilling locations. The assets being acquired are primarily located adjacent to our core property in the Onion Lake area where we recently announced aggressive development plans, further solidifying our presence in that area," said Gary Guidry, President and CEO of Pearl.

Pearl will participate in the capitalization of Serrano by providing $3 million to fund a 36% ownership interest. Current Nevarro shareholders will be entitled, through the Serrano Warrants, to subscribe for up to 2,666,667 shares, on a pro-rata basis, of Serrano, either as flow-through shares at a price of $0.625 per flow-through share or as non flow-through shares at a price of $0.50 per share. Serrano will be staffed with existing management of Nevarro. In addition to equity participation in low risk exploration and exploitation, Pearl will also obtain the right to participate in up to a 50% non-promoted working interest on any new prospects, and an option to acquire the remaining 50% interest in those prospects. This long-term relationship provides a growth vehicle in a core area for Pearl.

The transaction has been conditionally approved by the TSX Venture Exchange, subject only to the filing of final materials.

All references in this release to BOEs are based on a 6 to 1 conversion ratio. BOEs may be misleading, particularly if used in isolation. A BOE conversion of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities of Pearl or Nevarro within the United States. The securities of Pearl and Nevarro have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws. Accordingly, the shares may not be offered or sold in the United States or to U.S. persons (as such terms are defined in Regulation S under the 1933 Act) unless registered under 1933 Act and applicable state securities laws or an exemption from such registration is available.

Pearl is a public company focused on delivering disciplined growth by establishing a North American portfolio of oil and gas projects with an emphasis on large resource opportunities. Additional information on Pearl is available on our website at

Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.


Pearl Exploration And Production Ltd.
Gary Guidry
President and Chief Executive Officer
(403) 716-4051
(403) 261-1007 (FAX)


Pearl Exploration And Production Ltd.
Gary Hyde
Chief Operating Officer
(403) 716-4063
(403) 261-1007 (FAX)


Pearl Exploration And Production Ltd.
Arlene Weatherdon
Chief Financial Officer
(403) 716-4051
(403) 261-1007 (FAX)


Pearl Exploration And Production Ltd.
Sophia Shane
Corporate Development
(604) 806-3575

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