Pearl Exploration and Production Ltd. provides the following operational and financial update.

Operational Highlights

Mooney

During the first half of 2008 Pearl drilled four net horizontal wells in our Mooney area. Three of the new wells will form the basis of a polymer pilot which has been accelerated to be initiated in Q4 2008. Preliminary results from the pilot are expected by Q1 2009. Plans for a field wide polymer flood implementation are expected to be finalized by Q2 2009 with implementation targeted as early as the end of 2009. The implementation of the waterflood continues with its initiation expected in Q4 2008 and continuing into the first half of 2009. In addition, plans are underway to commence a development drilling program by year end to extend the productive area to the west with the goals of increasing production and proven and probable reserves.

Onion Lake

In Onion Lake the Cyclic Steam Stimulation (CSS) thermal pilot commenced steam injection on May 15th over a month ahead of schedule. The first steam cycle on the first well was completed on June 19th and the well is currently producing between 90 and 100 barrels of oil per day which is within expected modeling parameters. Steam injection on the second well began on June 20th and first production is expected to commence before the end of July.

San Miguel

At San Miguel, Pearl and its 50% partner TXCO have finished construction of its Steam-Assisted Gravity Drainage (SAGD) pilot located within the Chittim "B" Field. Steam injection commenced on June 1, 2008 with preliminary results expected by Q1 2009. Temperature monitoring of the well pair indicates that the steam chamber is building as anticipated. At the Saner Ranch Field, construction is continuing on the second production pilot. The Saner Ranch pilot includes both a vertical inverted five spot well pattern and a horizontal three well pattern utilizing a modified Fracture Assisted Steamflood Technology (FAST) process. The three horizontal wells were drilled and completed successfully in Q2 2008. All major long lead time items for the pilot are on site with assembly of facilities and infrastructure installation proceeding on schedule. The pilot is expected to be operational in the third quarter of 2008 and preliminary results are expected during the first half of 2009. By the end of the second quarter of 2009, Pearl and its partner expect to select which of the three recovery techniques will use be used to form the basis of a commercial development project.

Blackrod

At Blackrod, as previously announced, the Company has entered into an agreement to acquire an additional 30% working interest in 3,886 contiguous hectares of oil sands leases in the project area. In addition, Pearl is continuing with its plans to drill a 10 to 15 core well program in the 2008/2009 winter to further delineate this deposit and gather additional petrophysical data. Pearl remains on track to initiate steaming at its Steam-Assisted Gravity Drainage (SAGD) pilot, comprised of single well pair pilot and related facilities, during the first half of 2009. The application for the required governmental approvals of the thermal SAGD pilot project was submitted in May of 2008.

Production

Production for the second quarter averaged approximately 8,200 Boe/d, down from the previous quarter due to the sale of a portion of our non-core assets and natural decline. Current production is approximately 5,600 barrels a day due to a temporary curtailment of 600 Boe/d of production in our Mooney area while we install some in-field infrastructure and approximately 300 Boe/d of shut-in production awaiting workovers in other areas. We anticipate having all of this shut-in production back on-line by mid-August.

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