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Pine Cliff Energy Ltd. Announces First Quarter Results

May 28, 2010 - 12:38 PM ET

CALGARY, ALBERTA--(Marketwire - May 28, 2010) - 

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Pine Cliff Energy Ltd. (www.pinecliffenergy.com) (TSX VENTURE:PNE) is pleased to announce its financial and operational results for the three months ended March 31, 2010.

/T/

For the three months ended               March 31,  December 31,   March 31,
                                             2010          2009        2009
----------------------------------------------------------------------------
FINANCIAL ($)
Revenue - Oil and Gas                     210,797       119,726     193,725
Cash Flow (Deficiency) from Operations      2,206      (115,801)   (229,307)
 Per Share Basic and Diluted                 0.00         (0.00)      (0.01)
Loss                                     (188,651)   (1,734,926)   (498,532)
 Per Share Basic and Diluted                (0.00)        (0.04)      (0.01)
Capital Expenditures and Acquisitions   1,013,177       266,470     119,786
Total Assets                            3,768,237     3,475,877   4,966,907
Working Capital (Deficiency)             (426,596)      491,064   1,903,038
Shareholders' Equity                    2,305,659     2,363,915   4,644,004
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OPERATIONS
Oil and NGLs  - Barrels Per Day                 3             1           1
              - Average Price ($ per
                barrel)                     81.19         69.71       48.06
Natural Gas   - MCF Per Day                   435           264         392
              - Average Price ($ per MCF)    4.91          4.55        5.32
Total Barrels of Oil Equivalent (BOE) Per
 Day (1)                                       76            45          66
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Barrels of oil equivalent (BOE) are calculated using a conversion ratio
    of 6 MCF to 1 barrel of oil. The conversion is based on an energy
    equivalency conversion method primarily applicable at the burner tip and
    does not represent a value equivalency at the wellhead and as such may 
    be misleading if used in isolation.

/T/

Report to Shareholders

Pine Cliff Energy Ltd. ("Pine Cliff" or "the Company") is pleased to report its operational and financial results for the three months ended March 31, 2010. 

Operations

Production increased approximately 15 percent in the first quarter of 2010 compared with the first quarter of 2009 and approximately 69 percent quarter over quarter to average 76 BOE per day. The production increases are mainly attributable to the increased activity in the Company's Sundance properties in Alberta, Canada. 

During the first quarter of 2010, Pine Cliff completed and placed on production two gross (0.30 net) natural gas wells. The wells averaged approximately 444 MCF per day net to the Company during the month of March. Pine Cliff has continued to pursue additional opportunities in this area and has participated in drilling another two gross (0.30 net) natural gas wells. These wells came on production in April 2010 and production from these wells is currently exceeding 5,100 MCF per day (770 MCF per day net). 

Pine Cliff intends to continue increasing its activities in Canada by aggressively pursuing acquisition opportunities and participating in a more active drilling program. 

Financial

General and administrative expenditures decreased approximately 45 percent in the first quarter of 2010 compared to the first quarter of 2009 and decreased by approximately 25 percent compared to the fourth quarter of 2009. Both reductions are mainly due to the reduction of the Company's South American activities. 

The disappointing 2008 drill results coupled with the increasingly difficult business and political environment required management and the Board of Directors to reconsider its commitment to Argentina as an area of new exploration and growth. As a result, the Company actively reduced its consulting services and other expenses in this area since the second quarter of 2009. 

As of March 31, 2010, Pine Cliff had a working capital deficiency of $426,596. Additional funds will be required to cover the Company's remaining 2010 budgeted capital expenditures of $360,000 in relation to the tie-ins of the two (0.30 net) aforementioned natural gas wells. The deficiency is anticipated to be eliminated by cash flow from the newly completed gas wells and through the possible entering into of a bank facility or equity placement. In the short term, the CEO and director will finance the working capital shortfall by an unsecured loan at an interest rate of bank prime plus one percent. 

Outlook

The Board of Directors and management remain optimistic that Pine Cliff will be able to take advantage of the many opportunities available to it to redirect its operations towards a domestic perspective. The Company will be considering the various options that may become available in regards to its Argentina operations. Pine Cliff has been successful in realizing promising results on its Sundance properties in Alberta and intends to continue seeking out additional domestic opportunities of producing and non-producing properties. 

FORWARD-LOOKING INFORMATION

Certain statements contained in this press release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this press release includes, but is not limited to: expected cash provided by continuing operations; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and natural gas industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: the risks of foreign operations; foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived therefrom. Except as required by law, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. 

The forward-looking information contained herein is expressly qualified by this cautionary statement.

/T/

Quarterly Financial and Operational Highlights

                       2010                          2009
----------------------------------------------------------------------------
                        1st           4th        3rd         2nd        1st
Financial ($)
Revenue - Oil
 and Gas            210,797       119,726     93,177     111,773    193,725
Cash Flow
 (Deficiency)
 from
 Operations           2,206      (115,801)   (74,702)   (294,455)  (229,307)
 Per Share
  Basic and
  Diluted              0.00         (0.00)      0.00       (0.01)     (0.01)
Loss               (188,651)   (1,734,926)  (263,808)   (325,010)  (498,532)
 Per Share
  Basic and
  Diluted            (0.00)         (0.04)     (0.01)      (0.01)     (0.01)

Capital
Expenditures
and
 Acquisitions    1,013,177        266,470    600,732       9,581    119,786

Total Assets     3,768,237      3,475,877  4,900,934   4,558,217  4,966,907
Working
 Capital
 (Deficiency)     (426,596)       491,064    991,619   1,738,974  1,903,038

Shareholders'
 Equity          2,305,659      2,363,915  4,089,767   4,341,385  4,644,004
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
Oil and
 liquids
 (barrels per
 day)                    3              1          1           2          1
Natural Gas
 (MCF per day)         435            264        295         312        392
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                             2008
----------------------------------------------------------------------------
                                 4th          3rd          2nd          1st

Financial ($)
Revenue - Oil and
 Gas                         295,944      129,537      138,415      143,116
Cash Flow
 (Deficiency) from
 Operations                  (68,211)    (332,184)    (122,517)    (202,613)
 Per Share Basic
  and Diluted                  (0.00)       (0.01)       (0.00)       (0.01)
Loss                      (6,423,691)    (505,953)    (295,111)    (317,113)
 Per Share Basic
  and Diluted                  (0.14)       (0.01)       (0.01)       (0.01)
Capital
 Expenditures and
 Acquisitions              1,067,843    1,511,745    2,516,214      281,388
Total Assets               5,570,015   11,621,915   12,043,617   12,221,650
Working Capital            2,316,982    3,440,165    5,278,074    7,937,179
Shareholders'
 Equity                    5,044,701   11,400,311   12,043,617   12,003,398
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
Oil and liquids (barrels
 per day)                          2            1            -            4
Natural Gas (MCF per day)        453          146          142          168
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production

                                           Three months ended
                                     March 31,   December 31,      March 31,
                                         2010           2009           2009
----------------------------------------------------------------------------
Crude oil and NGLs (barrels per
 day)                                       3              1              1
Natural gas (MCF per day)                 435            264            392
Total BOE per day (1)                      76             45             66
----------------------------------------------------------------------------

(1) Barrels of oil equivalent (BOE) are calculated using a conversion ratio
    of 6 MCF to 1 barrel of oil. The conversion is based on an energy
    equivalency conversion method primarily applicable at the burner tip
    and does not represent a value equivalency at the wellhead and as such
    may be misleading if used in isolation.

/T/

During the first quarter the Company completed and placed on production two gross (0.30 net) natural gas wells. The wells averaged approximately 444 MCF per day net to the Company during the month of March. The Company has an expected annual decline rate of approximately 20 percent on its other production. 

During the first quarter, the Company participated in drilling another two (0.3 net, 15 percent working interest in each well) natural gas wells on its Sundance property. These wells came on production in April 2010. Production from these wells as of the date of this report exceeds 5,100 MCF per day (770 MCF per day net). 

/T/

Revenue

                                          Three months ended
                                     March 31,   December 31,      March 31,
($)                                      2010           2009           2009
----------------------------------------------------------------------------
Revenue:
 Oil and gas sales                    210,797        119,726        193,725
Average Realized Prices
 Crude oil and NGLs (per barrel)        81.19          69.71          48.06
 Natural gas (per MCF)                   4.91           4.55           5.32
----------------------------------------------------------------------------

/T/

Revenue from petroleum and natural gas sales for Q1 2010 increased by $17,072 from Q1 2009 due to increased production volumes. An increase in revenue from Q4 2009 to Q1 2010 was primarily due to higher production volumes and increased commodity prices for natural gas. The Company did not have hedging agreements in either 2010 or 2009 and presently does not have any future hedging agreements.

/T/

Royalties

                                          Three months ended
                                     March 31,       December      March 31,
 ($)                                     2010       31, 2009           2009
----------------------------------------------------------------------------
Crown royalties                        17,369          9,257         44,556
Gross overriding royalties              5,121          2,902          4,796
----------------------------------------------------------------------------
Total royalty expense                  22,490         12,159         49,352
----------------------------------------------------------------------------
Percentage of revenue                    10.7%          10.2%          25.5%
$ per BOE                                3.33           2.91           8.61
----------------------------------------------------------------------------

/T/

Crown royalties are lower in the first quarter of 2010 compared to the first quarter of 2009 due to a crown royalty holiday on a well drilled late in 2008. The crown royalty adjustment was not received until the second quarter of 2009. Crown royalties increased in Q1 2010 compared to Q4 2009 due to the production from the two (net 0.30) natural gas wells that were on production in the first quarter of 2010. Gross overriding royalties are also higher for the same reason. Royalties are expected to increase due to the two (0.3 net) wells that have come on production in April 2010. 

Alberta Government Competitiveness Review

The results of the Alberta Government Competitiveness Review on the changes to the current Alberta crown royalty structure come into effect January 1, 2011. Crown royalty rates have not been disclosed at this time. Management believes the result of the changes in the Alberta Crown Royalty structure will not likely have a material impact on crown royalties in the future. 

/T/

Interest Income
                                          Three months ended
                                     March 31,   December 31,      March 31,
($)                                      2010           2009           2009
----------------------------------------------------------------------------
Interest income                             -             16          5,781
----------------------------------------------------------------------------

/T/

The Company maintains both Canadian and U.S. investment accounts that pay interest at prime less various percentages as long as the Company maintains certain minimum account balances. The Company did not earn any interest as the Company did not maintain the minimum cash balance to earn interest. 

/T/

Production Costs
                                        Three months ended
                                    March 31,    December 31,      March 31,
($)                                      2010           2009           2009
----------------------------------------------------------------------------
Production costs                       45,978         31,354         57,809
$ per BOE (1)                            6.81           7.51          10.08
----------------------------------------------------------------------------

(1) Barrels of oil equivalent (BOE) are calculated using a conversion ratio
    of 6 MCF to 1 barrel of oil. The conversion is based on an energy 
    equivalency conversion method primarily applicable at the burner tip
    and does not represent a value equivalency at the wellhead and as such
    may be misleading if used in isolation.

/T/

Production costs were lower in Q1 2010 versus Q1 2009 due to adjustments to prior period charges in Q1 2009. The increase in production costs in the first quarter of 2010 compared to the fourth quarter of 2009 was mainly due to gas compression and processing charges on increased volumes resulting from the two (0.3 net) wells that came on production in Q1 2010. 

/T/

General and Administrative

                                          Three months ended
                                     March 31,   December 31,      March 31,
($)                                      2010           2009           2009
----------------------------------------------------------------------------
G&A expense                           179,425        239,077        324,997
----------------------------------------------------------------------------

/T/

General and administrative (G&A) expenditures decreased significantly in Q1 2010 compared to Q1 2009 due to a reduction in the Company's South American activities. With the unsuccessful completion of the three-well drill program on the Canadon Ramirez Concession, the Company's Board of Directors and management are reviewing the Company's involvement in Argentina and have reduced its consulting services and other international expenses since Q2 2009. The decrease in G&A expenditures between Q1 2010 and Q4 2009 is primarily due to a $66,000 interest charge by the operator of the Canadon Ramirez Concession recorded in Q4 2009. The Company is currently disputing the interest charge. 

Pine Cliff does not have any employees at the present time but has engaged Bonterra Energy Corp. (Bonterra) a related party (see Related Party section), to provide management services and engage the services of consultants on a contract or temporary basis. Pine Cliff's subsidiary CanAmericas Energy Ltd. (CanAmericas) has also engaged the consulting services of an individual professional as senior management and officer of CanAmericas. 

/T/

Foreign Exchange Loss (Gain)

                                         Three months ended
                                     March 31,   December 31,      March 31,
($)                                       2010          2009           2009
----------------------------------------------------------------------------
Foreign exchange loss (gain)            (6,495)       57,885          7,043
----------------------------------------------------------------------------

/T/

The Company maintains foreign denominated bank accounts to facilitate its foreign operations. The gain on foreign exchange in Q1 2010 relates to the depreciation of the Canadian dollar with the Argentine peso. During the fourth quarter of 2009, $53,000 of foreign exchange gain was booked to capital assets to partially offset a $110,000 foreign exchange loss booked to capital assets in 2008. This reclassification of foreign exchange gain was the result of the foreign exchange gain and loss on outstanding cash call receivables denominated in U.S. dollars and Argentine pesos which were expended in 2009. 

/T/

Stock-Based Compensation

                                          Three months ended
                                     March 31,   December 31,      March 31,
($)                                      2010           2009           2009
----------------------------------------------------------------------------
Stock-based compensation                 2,895          6,074         97,834
----------------------------------------------------------------------------

/T/

The Company has a stock-based compensation plan. The Company records a compensation expense over the vesting period based on the fair value of options granted to employees of the management company (see section "Related Party Transactions"), directors and service providers in respect of the Company. No new options were issued in the first quarter of 2010. Of the options outstanding as of March 31, 2010, $2,211 of stock-based compensation is remaining to be expensed in 2010 and 2011. 

Depletion, Depreciation, and Accretion and Dry Hole Exploration Costs

During the first quarter of 2010, the Company expensed $120,820 (2009 - $106,540) for depletion, depreciation and accretion of its property and equipment. The increase is related to increased production volumes in the first quarter of 2010. The fourth quarter of 2009 had $79,186 lower depletion, depreciation and accretion due to lower production volumes. 

The first quarter of 2010 also had a full impairment provision of $15,463 on the Canadon Ramirez Concession in Argentina as the three well exploration program was unsuccessful. In Q4 2009, $31,071 was expensed to dry hole costs and no costs were written-off in Q1 2009.

The first quarter of 2010 also had a full impairment provision of $17,490 on the Laguna de Piedra Concession in Argentina that the Farmor of this Concession represented to Pine Cliff that it had clear title to this property. Subsequent to the Company earning in on the property, the local municipality designated a portion of the Laguna Concession surface area as a "Nature Area". The operator of the Concession has commenced negotiations with the municipality to have it reinstate the Concession, but negotiations have been unsuccessful at this time. The Company took a $1,463,712 impairment provision for this same property in Q4 2009.

Income Taxes

The Company follows the liability method of accounting for income taxes under which the income tax provision is based on the temporary differences in the accounts calculated using income tax rates expected to apply in the year in which the temporary differences will reverse. The Company has sufficient tax pools such that it is not liable for current income tax. However the Company is subject to a one percent Argentina capital tax on assets in Argentina. These amounts are deductible from future income earned in Argentina.

/T/

The Company has the following tax pools which can be used to reduce future 
taxable income:

                                         Rate of Utilization %    Amount ($)
----------------------------------------------------------------------------
Undepreciated capital costs                                 25      391,795
Foreign exploration expenditures                            10    5,875,000
Share issue costs                                           20       28,609
Canadian exploration expenditures                          100      392,110
Canadian development expenditures                           30    1,971,597
Canadian oil and gas expenditures                           10      517,708
Non-capital loss carry forward (i)                         100    5,836,448
----------------------------------------------------------------------------
                                                                 15,013,267
----------------------------------------------------------------------------

(i) $567,708 expires 2026, $1,523,672 expires 2027, $1,684,143 expires in 
    2028, $1,769,136 expires in 2029 and $291,789 expires in 2030.

/T/

Non-Controlling Interest

A private foreign company (Foreign Corp.) owns seven percent of CanAmericas, a 93 percent owned subsidiary of Pine Cliff. In 2008, losses in CanAmericas exceeded the non-controlling interest investment and therefore none of CanAmericas' loss in 2010 and 2009 was allocated to the non-controlling interest.

/T/

Loss

                                          Three months ended
                                     March 31,   December 31,      March 31,
($)                                      2010           2009           2009
----------------------------------------------------------------------------
Loss                                  188,651      1,734,926        498,532
Loss per share                           0.00           0.04           0.01
----------------------------------------------------------------------------

/T/

The decrease in the first quarter loss of 2010 compared to Q1 2009 was predominantly due to increased oil and gas revenue and decreased general and administrative costs. The decrease in the Q1 2010 loss compared to Q4 2009 loss was predominantly due to the impairment provision for the Laguna de Piedra Concession in Q4 2009 of $1,463,712 compared to $17,490 in Q1 2010. 

/T/

Cash Flow (Deficiency) from Operations
                                          Three months ended
                                    March 31,    December 31,      March 31,
($)                                      2009           2009           2009
----------------------------------------------------------------------------
Cash flow (deficiency) from
 operations                             2,206       (115,801)      (229,307)
Cash flow (deficiency) from operations
 per share                               0.00          (0.00)         (0.01)
----------------------------------------------------------------------------

/T/

Cash flow increased in the first quarter of 2010 compared to Q1 2009 as the Company had increased oil and gas revenue, decreased general and administrative costs, decreased production costs and decreased crown royalties. The increase in cash flow from Q1 2010 compared to Q1 2009 was primarily due to increased oil and gas sales.

Related Party Transactions

Pine Cliff has a management agreement with Bonterra, a company with common directors and management with Pine Cliff, to have Bonterra provide executive services (President and CEO, CFO and COO), accounting services, oil and gas administration and office administration. The management fee consists of a monthly fee of $7,500 (2009 - $10,000), three percent of net earnings before income taxes plus minor general and administrative expenses incurred by Bonterra that were specifically attributable to Pine Cliff. Total fees for Q1 2010 were $22,500 (Q1 2009 - $30,000). As at March 31, 2010, amounts owing to Bonterra were $458 (December 31, 2009 - $448). This agreement with Bonterra can be cancelled by either party giving 90 days notice.

Liquidity and Capital Resources

As of March 31, 2010, Pine Cliff had working capital (deficiency) of ($426,596) (December 31, 2009 - $491,064). Additional funds will be required to cover the Company's remaining 2010 budgeted capital expenditures of $360,000 in relation to the tie-in of its two (0.3 net) Canadian natural gas wells in the Sundance area. The CEO and director will finance the working capital shortfall by an unsecured loan, that bears interest at Canadian chartered bank prime plus one percent and will have no set repayment terms but will be payable on demand.

Canadon Ramirez Concession

Pine Cliff through its subsidiaries has paid 100 percent of costs totaling U.S. $5,500,000, including a 21 percent Value Added Tax (V.A.T.), for work to be conducted on the concession to earn a 49 percent participating interest, which included a three well drilling program. As of March 31, 2010 all costs relating to this concession have been written off. There are no further material farm-in commitments on this property, but the Company may decide to do additional exploratory programs in the future. 

Laguna de Piedra Concession

Pine Cliff through its subsidiaries has paid 40 percent of costs totaling U.S. $1,120,000 including V.A.T. to earn a 25 percent participating interest in the entire permit. The Company had planned to participate in further programs on this project. The certainty of the Farmor having title to the Concession is under review. The Company has therefore taken a full impairment provision on the property.

The V.A.T amount is recoverable against V.A.T liabilities generated on the sale of petroleum production in Argentina. The V.A.T amount has been capitalized to exploration costs, as its recoverability can not be determined until a successful producing property is established.

The Company has a line of credit through its subsidiary CanAmericas to the lower of its available amount of cash or U.S. $3,690,000, which can be drawn by means of letters of guarantee and letters of credit. The line of credit may be cancelled without notice. No letters of guarantee or credit are currently outstanding.

The Company is currently in dispute with the operator of the Canadon Ramirez Concession for the 2008 Canon (land rental payments). It is the Company's interpretation that the operator is responsible for the 2008 Canon under the Joint Operating Agreement. Should the Company be unsuccessful, the amount of its share of the Canon is approximately $122,000. If the disputed amount (or a portion of) is settled the Company will capitalize the costs.

The following consolidated financial statements and notes to the consolidated financial statements have been provided for further details.

/T/

Consolidated Balance Sheets

As at March 31, 2010 and December 31, 2009 (unaudited)

($)                                                     2010           2009
----------------------------------------------------------------------------
Assets
Current
 Cash                                                758,304      1,372,643
 Accounts receivable                                 173,776        129,904
 Prepaid expenditures                                 18,716         16,345
----------------------------------------------------------------------------
                                                     950,796      1,518,892
----------------------------------------------------------------------------
Property and Equipment (Note 7)
 Property and equipment                            4,355,055      3,374,830
 Accumulated depletion and depreciation           (1,537,614)    (1,417,845)
----------------------------------------------------------------------------
Net Property and Equipment                         2,817,441      1,956,985
----------------------------------------------------------------------------
                                                   3,768,237      3,475,877
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
 Accounts payable and accrued liabilities
  (Note 5)                                         1,377,392      1,027,828

Asset Retirement Obligations                          85,186         84,134
----------------------------------------------------------------------------
                                                   1,462,578      1,111,962
----------------------------------------------------------------------------
Non-Controlling Interests (Note 6)                         -              -
Contingent Liability (Note 12)
Shareholders' Equity
 Share capital (Note 9)                           14,819,372     14,593,560
 Contributed surplus                                 764,203        859,620
 Deficit                                         (13,277,916)   (13,089,265)
 Accumulated other comprehensive income                    -              -
----------------------------------------------------------------------------
                                                   2,305,659      2,363,915
----------------------------------------------------------------------------
                                                   3,768,237      3,475,877
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Consolidated Statements of Loss, Comprehensive Loss and Deficit

For the three months ended March 31 (unaudited)

($)                                                     2010           2009
----------------------------------------------------------------------------
Revenue
 Oil and gas sales                                   210,797        193,725
 Royalties                                           (22,490)       (49,352)
 Interest income                                           -          5,781
----------------------------------------------------------------------------
                                                     188,307        150,154
----------------------------------------------------------------------------
Expenses
 Production costs                                     45,978         57,809
 General and administrative                          179,425        324,997
 Foreign exchange loss (gain)                         (6,495)         7,043
 Stock-based compensation                              2,895         97,834
 Depletion, depreciation and accretion               120,820        106,540
 Impairment of oil and gas assets (Note 7)            32,953              -
----------------------------------------------------------------------------
                                                     375,576        594,223
----------------------------------------------------------------------------
Loss Before Taxes and Non-Controlling
 Interests                                          (187,269)      (444,069)
----------------------------------------------------------------------------
Taxes (Note 8)
 Current                                               1,382         54,463
 Future                                                    -              -
----------------------------------------------------------------------------
                                                       1,382         54,463
----------------------------------------------------------------------------
Loss Before Non-Controlling Interests               (188,651)      (498,532)
Loss applicable to non-controlling interests
 (Note 6)                                                  -              -
----------------------------------------------------------------------------
Loss and Comprehensive Loss for the Period          (188,651)      (498,532)
Deficit, Beginning of Period                     (13,089,265)   (10,266,989)
----------------------------------------------------------------------------
Deficit, End of Period                           (13,277,916)   (10,765,521)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Loss Per Share - Basic and Diluted                     (0.00)         (0.01)
----------------------------------------------------------------------------


Consolidated Statements of Cash Flow
 For the three months ended March 31 (unaudited)


($)                                                     2010           2009
----------------------------------------------------------------------------
Operating Activities
 Loss for the period                                (188,651)      (498,532)
 Items not affecting cash
  Stock-based compensation                             2,895         97,834
  Depletion, depreciation and accretion              120,820        106,540
  Impairment of oil and gas assets                    32,953              -
----------------------------------------------------------------------------
                                                     (31,983)      (294,158)
----------------------------------------------------------------------------
 Change in non-cash working capital
  Accounts receivable                                (22,314)        14,221
  Prepaid expenditures                                (2,371)        (7,512)
  Accounts payable and accrued liabilities            58,874         58,142
----------------------------------------------------------------------------
                                                      34,189         64,851
----------------------------------------------------------------------------
Cash Provided by (Used in) Operating Activities        2,206       (229,307)
----------------------------------------------------------------------------
Financing Activities
 Share option proceeds                               127,500              -
----------------------------------------------------------------------------
Cash Provided by Financing Activities                127,500              -
----------------------------------------------------------------------------
Investing Activities
 Property and equipment expenditures              (1,013,177)      (119,786)
 Change in non-cash working capital
  Accounts receivable                                (21,558)             -
  Accounts payable and accrued liabilities           290,690       (261,565)
----------------------------------------------------------------------------
Cash Used in Investing Activities                   (744,045)      (381,351)
----------------------------------------------------------------------------
Net Cash Outflow                                    (614,339)      (610,658)
Cash, Beginning of Period                          1,372,643      2,624,556
----------------------------------------------------------------------------
Cash, End of Period                                  758,304      2,013,898
----------------------------------------------------------------------------

Cash interest paid                                         -              -
Cash taxes paid                                       40,097          7,717
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Notes to the Consolidated Financial Statements

Periods ended March 31, 2010 and 2009 (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements for Pine Cliff Energy Ltd. ("Pine Cliff" or "the Company") as at and for the three months ended March 31, 2010 should be read in conjunction with the audited consolidated financial statements as at and for the year ended December 31, 2009. The notes to these interim consolidated financial statements do not conform in all respects to the note disclosure requirements of generally accepted accounting policies (GAAP) for annual consolidated financial statements. These interim consolidated financial statements are prepared using the same accounting policies and methods of computation as disclosed in the annual consolidated financial statements as at and for the year ended December 31, 2009, except for those disclosed in Note 3 below. The disclosures provided within are incremental to those included with the annual financial statements.

2. GOING CONCERN

These financial statements have been prepared on a going concern basis which assumes that the Company will be able to discharge its obligations and realize its assets in the normal course of business at the values at which they are carried in these financial statements, and that the Company will be able to continue its business activities.

At March 31, 2010, the Company had working capital deficiency of $427,000, a capital budget for the remaining nine months of 2010 of $360,000 and cash (deficiency) from operations of $2,000 (March 31, 2009 - ($229,000)). The Company does not currently generate sufficient cash flow to meet its capital commitments.

The Company has committed to participate in tying in two wells (0.3 net) drilled in 2010 on its Canadian Sundance property at an estimated cost to the Company of $360,000.

The future funding of the capital program will be funded by the CEO and director by an unsecured loan, that bears interest at Canadian chartered bank prime plus one percent and will have no set repayment terms but will be payable on demand. This loan will ensure the Company's ability to finance its activities, to successfully explore, develop, produce and market economically viable reserves. As at March 31, 2010, the Company had increased the value of its proved and probable oil and gas reserves by participating in a successful two well (0.3 net) drilling program. Management believes that the current reserves also have third party lending value and that the Company may be able to raise additional capital required for the future development of the Company's future projects.

Management and the Board of Directors believe that the going concern assumption is appropriate for these financial statements. If this assumption is not appropriate, adjustments to the carrying values of the assets and liabilities, revenues and expenses and the balance sheet classifications used may be necessary in the future.

3. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2008, the CICA issued Section 1582, "Business Combinations", which will replace former guidance on business combinations. Section 1582 establishes principles and requirements of the acquisition method for business combinations and related disclosures. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011 with earlier adoption permitted.

In December 2008, the CICA issued Sections 1601, "Consolidated Financial Statements", and 1602, "Non-controlling Interests", which replaces existing Section 1600. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 provides guidance on accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards are effective on or after the beginning of the first annual reporting period beginning on or after January 1, 2011 with earlier adoption permitted.

The Canadian Accounting Standards Board has confirmed that IFRS will replace Canadian GAAP effective January 1, 2011, including comparatives for 2010, for Canadian publicly accountable enterprises.

The Company is evaluating the impact of these standards on its consolidated financial statements.

4. BANKING AGREEMENT

The Company has a line of credit through its subsidiary CanAmericas for the lower of its available amount of cash or U.S. $3,690,000, which can be drawn by means of letters of guarantee and letters of credit. The line of credit may be cancelled without notice. No letters of guarantee or credit are currently outstanding.

5. RELATED PARTY TRANSACTIONS

Pine Cliff has a management agreement with Bonterra Energy Corp. (Bonterra) an oil and gas corporation publicly traded on the Toronto Stock Exchange, with common directors and management, to provide executive services, accounting services, oil and gas administration and office administration for Pine Cliff. Total fees for the three month period were $22,500 (2009 - $30,000) plus minimal administrative costs. As of March 31, 2010 Pine Cliff owed Bonterra $458 (December 31, 2009 - $448). This agreement can be cancelled by either party giving 90 days notice.

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

6. NON-CONTROLLING INTERESTS

The Company has incorporated a subsidiary company, CanAmericas Energy Ltd. (CanAmericas) to explore and develop oil and gas properties primarily in South America. CanAmericas is owned 93 percent by the Company and seven percent by a foreign private corporation (Foreign Corp.). CanAmericas was initially financed by investments of U.S. $1,400,000 for 5,600,000 common shares from the Company and U.S. $100,000 for 400,000 common shares from Foreign Corp.

There were no changes to non-controlling interest during the three months ended March 31, 2010 and the year ended December 31, 2009.

Foreign Corp. has been granted an option to acquire an additional 1,000,000 common shares of CanAmericas at U.S. $0.25 per common share. Fifty percent of the options vested on January 13, 2007, and the remaining 50 percent vested on January 13, 2008, and all of the options expire on January 13, 2011.

7. PROPERTY AND EQUIPMENT

/T/

($)                                   March 31, 2010      December 31, 2009
----------------------------------------------------------------------------
                                         Accumulated            Accumulated
                                       Depletion and          Depletion and
                                   Cost Depreciation      Cost Depreciation
----------------------------------------------------------------------------
Petroleum and natural gas
 properties and related
 equipment                    4,309,098    1,502,422 3,328,873    1,384,807
Furniture, equipment and
 other                           45,957       35,192    45,957       33,038
----------------------------------------------------------------------------
                              4,355,055    1,537,614 3,374,830    1,417,845
----------------------------------------------------------------------------

/T/

As of March 31, 2010, the Company spent $7,674,979 (December 31, 2009 - $7,642,026) for exploration activities for the Canadon Ramirez Concession and Laguna de Peidra Concesssion (South American Properties). For the three months ended March 31, 2010, a full impairment provision of $15,463 (2009 - $Nil) was taken on the exploration costs related to the Canadon Ramirez Concession as the previous programs were deemed to be unsuccessful.

A full impairment provision for the three months ended March 31, 2010 of $17,490 (2009 - $Nil) was taken on the Laguna de Piedra Concession as access to a portion of the surface to complete programs on the exploration permit is currently under negotiation with the local municipality. Subsequent to the Company earning in on the property, the local municipality designated a portion of the Laguna Concession surface area as a "Nature Area." The operator of the Concession has commenced negotiations with the municipality to resolve this issue.

Development costs of $846,613 included in petroleum and natural gas properties and related equipment at March 31, 2010 were incurred to drill two natural gas wells in Canada. The drilling costs for these wells have been excluded from costs subject to depletion and depreciation as these wells were not completed or producing as of March 31, 2010.

8. TAXES

The Company has a current tax expense of $1,382 (2009 - $54,463) related to Argentina capital tax. A one percent Argentina capital tax is payable in respect of the exploration costs for the Canadon Ramirez and the Laguna de Piedra Concessions.

The Company continues to record a full valuation allowance for its future income tax assets as the recoverability is uncertain.

9. SHARE CAPITAL

Authorized

Unlimited number of Common Shares without nominal or par value.

Unlimited number of Class B Preferred Shares without nominal or par value which may be issued in one or more series.

/T/

Issued                                                Number      Amount ($)
----------------------------------------------------------------------------
Common Shares
Balance, January 1, 2010                          45,295,695     14,593,560
Issued on exercise of stock options                  850,000        127,500
Transfer of contributed surplus to share capital                     98,312
----------------------------------------------------------------------------
Balance, March 31, 2010                           46,145,695     14,819,372
----------------------------------------------------------------------------


The number of weighted average basic and diluted shares outstanding for the
three months ended March 31:

                                                        2010           2009
----------------------------------------------------------------------------
Basic shares outstanding(1)                       45,952,806     45,275,695
Dilutive share options                                13,997        201,353
----------------------------------------------------------------------------
Diluted shares outstanding                        45,966,803     45,477,048
----------------------------------------------------------------------------
(1) Basic shares outstanding is used to calculate basic and diluted loss per
    share when the Company is in a loss position


A summary of the changes to the Company's contributed surplus is presented
below:

Contributed surplus

($)                                                     2010           2009
----------------------------------------------------------------------------
Balance, January 1                                   859,620        722,968
Stock-based compensation expensed (non-cash)           2,895         97,834
Transfer of contributed surplus to share capital     (98,312)             -
----------------------------------------------------------------------------
Balance, March 31                                    764,203        820,802
----------------------------------------------------------------------------

/T/

The deficit balance is composed of accumulated losses.

A summary of the status of the Company's stock option plan as of March 31, 2010 and December 31, 2009, and changes during the three month and twelve month periods ending on those dates is presented as follows:

/T/

                                         March 31, 2010   December 31, 2009
----------------------------------------------------------------------------
                                              Weighted-           Weighted-
                                                Average             Average
                                               Exercise            Exercise
                                      Options     Price    Options    Price
----------------------------------------------------------------------------
Outstanding at beginning of period  3,126,000   $  0.63  3,118,000  $  0.63
Options granted                             -         -     40,000     0.15
Options exercised                    (850,000)     0.15    (20,000)    0.15
Options cancelled                  (1,125,000)     0.45    (12,000)    1.15
----------------------------------------------------------------------------
Outstanding at end of period        1,151,000   $  1.15  3,126,000  $  0.63
----------------------------------------------------------------------------
Options exercisable at end of
 period                             1,098,500   $  1.17  3,028,500  $  0.62
----------------------------------------------------------------------------


The following table summarizes information about stock options outstanding
at March 31, 2010:

                     Options Outstanding                Options Exercisable
----------------------------------------------------------------------------
                               Weighted-
                                 Average  Weighted-               Weighted-
Range of            Number     Remaining    Average       Number    Average
 Exercise      Outstanding   Contractual   Exercise  Exercisable   Exercise
 Prices         at 3/31/10          Life      Price   at 3/31/10      Price
----------------------------------------------------------------------------
$0.15-$0.30         40,000     1.8 years    $  0.15       20,000    $  0.15
1.10-1.20        1,071,000     0.3 years       1.18    1,038,500       1.18
1.40-1.50           40,000     0.8 years       1.49       40,000       1.49
----------------------------------------------------------------------------
$0.15-$1.50      1,151,000     0.4 years    $  1.15    1,098,500    $  1.17
----------------------------------------------------------------------------

/T/

The Company records a compensation expense over the vesting period based on the fair value of options granted to employees, directors and consultants. Unvested options as of March 31, 2010 vest 32,500 in 2010 and 20,000 in 2011.

10. SEGMENTED INFORMATION

The Company has operations in Canada and in South America. All operating activities are related to exploration, development and production of petroleum and natural gas:

/T/

($)                                        Canada  South America      Total
----------------------------------------------------------------------------
March 31, 2010
Revenue, gross                            210,797              -    210,797
Loss before non-controlling interest       19,975        168,676    188,651
Capital expenditures                      980,224         32,953  1,013,177
Property and equipment                  2,806,676         10,765  2,817,441
Total assets                            3,722,287         45,950  3,768,237

March 31, 2009
Revenue, gross                            197,748          1,758    199,506
Loss before non-controlling interest      182,880        315,652    498,532
Capital expenditures                        1,448        118,338    119,786

December 31, 2009
Property and equipment                  1,944,066         12,919  1,956,985
Total assets                            3,352,664        123,213  3,475,877
----------------------------------------------------------------------------

/T/

11. FINANCIAL AND CAPITAL RISK MANAGEMENT

Financial Risk Factors

The Company undertakes transactions in a range of financial instruments including:

- Cash deposits;

- Receivables;

- Payables;

The Company's activities result in exposure to a number of financial risks including market risk (commodity price risk, interest rate risk and foreign exchange risk) credit risk and liquidity risk. Financial risk management is carried out by senior management under the direction of the Board of Directors.

The Company does not enter into risk management contracts. The Company sells its oil and natural gas commodities at market prices at the date of sale in accordance with the Board directive.

Capital Risk Management

The Company's objectives when managing capital, which the Company defines to include shareholders' equity and working capital balances, are to safeguard the Company's ability to continue as a going concern, to continue providing returns to its shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may issue debt or new shares.

The Company monitors capital on the basis of the ratio of budgeted exploration capital requirements to current working capital. The budgeted capital expenditure to working capital base figures for March 31, 2010 is presented below:

/T/

($)                                                          March 31, 2010
----------------------------------------------------------------------------
Budgeted capital expenditure (1)                                    360,000
----------------------------------------------------------------------------
Current assets                                                      950,796
Current liabilities                                              (1,377,392)
----------------------------------------------------------------------------
Working capital deficiency                                         (426,596)
----------------------------------------------------------------------------
Working capital deficiency to budgeted capital expenditure
 (in months)                                                          (14.2)
----------------------------------------------------------------------------

(1) Budgeted capital expenditure represents the Company's estimated future
    twelve month capital expenditures.

/T/

The March 31, 2010 working capital deficiency to the budgeted capital expenditures is currently planned to be eliminated by cash flow from the newly completed gas wells and possible entering into of a bank facility or equity placement. In the short term the Company's CEO and director will provide financing (see Note 2).

The following section (a) of this note provides a summary of the Company's underlying economic positions as represented by the carrying values, fair values and contractual face values of its financial assets and financial liabilities.

The following section (b) addresses in more detail the key financial risk factors that arise from the Company's activities including its policies for managing these risks.

a) Financial assets, financial liabilities

The carrying amounts, fair value and face values of the Company's financial assets and liabilities other than cash are shown in Table 1.

/T/

Table 1

                                             As at March 31, 2010
($)                            Carrying Value     Fair Value     Face Value
----------------------------------------------------------------------------
Financial assets
Cash                                  758,304        758,304        758,304
Accounts receivable                   173,776        173,776        255,836
Financial liabilities
Accounts payable and accrued
 liabilities                        1,377,392      1,377,392      1,377,392
----------------------------------------------------------------------------

/T/

Financial instruments consisting of accounts receivable and accounts payable and accrued liabilities carried on the consolidated balance sheet are carried at amortized cost. Cash is carried at fair value. All of the fair value items are transacted in active markets. Pine Cliff classifies the fair value of these transactions according to the following hierarchy based on the amount of observable inputs used to value the instrument.

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

Pine Cliff's cash has been assessed on the fair value hierarchy described above and is considered Level 1.

b) Risks and mitigations

Market risk is the risk that the fair value or future cash flow of the Company's financial instruments will fluctuate because of changes in market prices. Components of market risk to which Pine Cliff is exposed are discussed below.

Commodity price risk

The Company's principal operation is the exploration and development of oil and natural gas properties in Canada. The Company also engages in the exploration and possible development of its South Americian properties. Fluctuations in prices of these commodities may directly impact the Company's performance and ability to continue its operations.

The Company's management currently does not use risk management contracts to set price parameters for its production.

Interest rate risk

Interest rate risk refers to the risk that the value of a financial instrument or cash flow associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that Pine Cliff uses. The principal exposure to the Company is on its cash balances which have a variable interest rate which gives rise to a cash flow interest rate risk.

Pine Cliff's cash consists of Canadian dollar, U.S. dollar and Argentinean peso investment chequing accounts on which it earns an insignificant amount of interest. Since these funds need to be accessible for the development of the Company's capital projects, management does not reduce its exposure to interest rate risk through entering into term contracts of various lengths.

Foreign exchange risk

The Company has foreign operations, but no revenue from production from the foreign properties and currently sells all of its Canadian production in Canadian currency. The Company has a U.S. cash and Argentina peso cash balance. Funds held in foreign denominated accounts are generally held for short periods of time, as the Company transfers and converts Canadian funds to foreign currency as payments for foreign currency denominated payables come due. As such, Pine Cliff does not mitigate exchange rate risk by using risk management contracts.

Credit risk

Credit risk is the risk that a contracting party will not complete its obligations under a financial instrument and cause the Company to incur a financial loss. Pine Cliff is exposed to credit risk on all financial assets included on the balance sheet. To help mitigate this risk, the Company maintains the majority of its cash balances with a major Canadian chartered bank.

Substantially all of the accounts receivable balance at March 31, 2010 ($173,776) and December 31, 2009 ($129,904) relates to product sales with Canadian oil and gas companies and crown royalty credits with the province of Alberta, all of which have consistently been received within 30 to 60 days. The Company, through its subsidiary CanAmericas, also has a receivable of $82,060 (2009 - $68,787) for Argentina Value Added Tax on non-capital expenditures. The Company has taken a full allowance on the V.A.T., as the Company has no Argentina income subject to V.A.T. against which to claim the receivable.

The Company assesses quarterly if there has been any impairment of the financial assets of the Company. The Company does not have any significant credit risk exposure to any single counterparty.

The carrying value of accounts receivable approximates their fair value due to the relatively short periods to maturity on this instrument. Currently no accounts receivable is greater than 90 days. The maximum exposure to credit risk is represented by the carrying amount on the balance sheet. There are no material financial assets that the Company considers past due.

Liquidity risk

Liquidity risk includes the risk that, as a result of Pine Cliff's operational liquidity requirements:

- The Company will not have sufficient funds to settle a transaction on the due date,

- The Company will not have sufficient funds to continue with its financing of its major exploration projects,

- The Company will be forced to sell assets at a value which is less than what they are worth, or

- The Company may be unable to settle or recover a financial asset at all.

To help reduce these liquidity risks, the Company:

- Arranged short-term financing at a reasonable interest rate with its CEO and director.

- Has changed its focus to its Canadian operations and minimized its requirements for its South American Properties.

12. CONTINGENT LIABILITY

The Company is currently in dispute with the operator of the Argentina Canadon Ramirez Concession for the 2008 Canon (land rental payments). It is the Company's interpretation that the operator is responsible for the 2008 Canon under the Joint Operating Agreement. Should the Company be unsuccessful, the amount of its share of the Canon is $122,000. If the disputed amount (or a portion thereof) is settled the Company will capitalize the costs.

For Further Information:

Further information relating to the Company may be found on www.sedar.com as well as on the Company's website at www.pinecliffenergy.com.



FOR FURTHER INFORMATION PLEASE CONTACT:

Pine Cliff Energy Ltd. George F. Fink President and CEO (403) 269-2289 (403) 265-7488 (FAX) or Pine Cliff Energy Ltd. Garth E. Schultz CFO (403) 269-2289 (403) 265-7488 (FAX) or Pine Cliff Energy Ltd. Kirsten Kulyk Manager, Investor Relations (403) 269-2289 (403) 265-7488 (FAX) info@pinecliffenergy.com www.pinecliffenergy.com