Pacific Rubiales provides an operational update and reports record production volumes in the first quarter
TORONTO, April 9, 2013 /PRNewswire/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) is pleased to provide an update on its 2013 year-to-date operations and exploration activities.
In summary, the Company expects to report record production volumes in the first quarter 2013, with production at the top of its annual guidance range. Exploration well activity year-to-date includes ten wells, with one currently drilling. This has resulted in four significant oil discoveries and two natural gas/condensate discoveries, for a 67% success rate. During the quarter, the Company issued U.S.$1.0 billion 5.125% coupon senior unsecured notes, maturing in 2023, extending its credit profile and strengthening its overall capital structure.
The Company expects to release its first quarter financial results after markets close on Wednesday May 8, 2013.
Ronald Pantin, Chief Executive Officer of the Company, commented:
"I am pleased with this very strong operational start to the year. We expect net after royalty production in the first quarter to be in the range of 126 - 128 Mboe/d, an increase of 30% from average 2012, and representing record quarterly production for the Company.
"WTI benchmark pricing in the quarter remained strong at approximately $94/bbl and the Company expects to achieve a premium differential to WTI of approximately $8 and $10 on its Castilla and Vasconia sales volumes respectively. Average price realization on crude oil sales should be in the range of $100 - $103/bbl.
"Looking at both this year and beyond, the Company is taking steps to achieve structural changes to its operating costs. Later in the year, the Company's financial performance is expected to benefit from a number of cost reduction initiatives and projects currently being undertaken. We are targeting overall operating cost reductions of approximately $8/bbl on a pro-forma basis during the remainder of this year, consisting of a targeted $3 - $4/bbl reduction in production costs, and $3 - $5/bbl reduction in transportation and diluent costs.
"Production costs are expected to decrease primarily as a result of the new Petroelectrica de los Llanos ("PEL") power transmission line (100% PRE project) which will connect the Company's Rubiales and Quifa fields with Colombia's electrical grid, supplying less expensive energy to power field operations. The PEL line is expected to be completed and operational in the third quarter 2013. Cost reductions on incremental produced barrels from the Rubiales and Quifa fields are expected from the ongoing water irrigation project, where produced water will be treated through reverse osmosis facilities and used for agroforestry, rather than re-injected. Water irrigation will be used to handle most of the increase in water production expected in the future from these fields. The water irrigation project is expected to startup in the fourth quarter 2013.
"Transportation costs will be reduced through the increased use of pipeline transportation, rather than trucks. The Company currently transports part of its heavy oil production from the Rubiales and Quifa fields by truck. The new business arrangements governing the OCENSA pipeline allowed the Company to contract additional spare capacity in the pipeline starting last month. In addition, the Bicentenario pipeline is expected to start shipments in the third quarter of the year, providing the Company with approximately 40 Mbbl/d of pipeline capacity.
"Diluent costs will be reduced through the start-up of the new diluent blending facility at the Cusiana station in the second quarter of the year, reducing diluent trucking costs to the producing fields. In addition the Company expects to use increasing volumes of its own light oil production for diluent, from the new light oil field acquisitions made in 2012.
"The Company's exploration success continues with a number of significant new oil and gas discoveries in the quarter, including an oil discovery in our first well drilled in offshore Brazil. We are looking forward to an exciting program of additional exploration wells during the remainder of the year.
"In late March we were awarded environmental permits for the "Quifa Hydrocarbon Exploitation Area" covering both the producing Quifa SW field and certain exploration areas in the Quifa North block. This permit will allow continued production growth in Quifa SW and the restart of the drilling in the exploration area surrounding the Rubiales field.
"On March 28, 2013 the Company announced the closing of the issuance of U.S.$1.0 billion 5.125% coupon senior unsecured notes, maturing in 2023, completing its third debt financing in the international capital markets in the past three years, supported by its improved credit agency ratings and financial performance.
"The net proceeds from the notes will be used by the Company primarily to repay its outstanding short-term debt, releasing the revolving credit facility, while extending its credit profile and strengthening its overall capital structure. The Company's strong growth record and relatively low leverage ratios enabled it to achieve unprecedented financing levels, with one of the lowest yields ever, for a Latin American corporate issue of U.S.$1.0 billion.
"Overall I am looking forward to a year of strong production growth, improving cost structure and an exciting exploration program, as we build for the long-term benefit of our shareholders and employees, the leading E&P Company focused in Latin America"
Year-to-date exploration drilling activity includes a total of ten wells in Colombia and Brazil, of which six have resulted in hydrocarbon discoveries, three were dry holes, and one is currently drilling. Also, the Company continued with the acquisition of seismic data, mostly offshore 3D surveys, in Peru and Colombia.
In the Llanos basin two wells drilled in the Cubiro block (Copa D-1x and Copa A Norte-1x), and one well drilled in the Arrendajo block (Yaguazo-1x), have resulted in new light oil discoveries. The Copa D-1x encountered 28 feet of net pay in the C-3, C-5 and C-6 sand units of the Carbonera formation and tested over 800 bbl/d of 38° API oil from a single completed zone in the C5 unit alone. The Copa A Norte-1x well encountered 25 feet of net pay in the Carbonera C-3, C-5 and C-7 sand units and is currently being completed in the C-5. The Yaguazo-1x well reached TD at 6,700 feet MD having encountered 15 feet of net pay in the Carbonera C-5 sand unit and the Company is preparing to complete and test the sand.
Also in the Llanos basin, southwest of the Company's Rubiales and Quifa fields, the Company completed the acquisition of 366 km2 of 3D seismic in the northern part of block CPE-6, this month. This seismic data, along with the 16 wells that have been drilled into the reservoir, will be used to detail the stratigraphic and structural models needed to construct the development plan for the Hamaca oil field discovery in the block. At present, the company is pre-constructing production facilities to be ready for when the blanket environmental license for the block is granted.
In Block CPO-1, the Company finished drilling the Altillo Oeste-1 exploration well in January. The well was plugged and abandoned as a dry hole.
In Block CPO-12, the Company finished drilling the Hayuelo-1x well, which was also plugged and abandoned as a dry hole.
In late March, the Company was awarded the environmental permits for the "Quifa Exploitation Area" which covers most of the Quifa block and will allow for continued production growth at Quifa SW as well as for the restarting of the drilling campaign in the exploration area surrounding the Rubiales field. The Company also received bids for the acquisition of 721 km2 of 3D seismic in the northwestern portion of the block.
In the Lower Magdalena basin, the Manamo-1x and Capure-1x exploration wells have resulted in two significant gas condensate discoveries in the Company's 100% WI Guama block. These two wells confirmed and extended the gas condensate field that was booked with certified 2P reserves at year-end 2012.
The Manamo-1x well flow tested at a maximum rate of 4.9 MMcf/d with 296 bbl/d of 54°API condensate, announced in a Company news release on February 20, 2013. The Capure-1x well is currently drilling and has encountered 23 feet of gas and/or gas condensate pay indicated on petrophysical logs in clean sands of the Porquero A formation, a secondary exploration target of the well. The well is now drilling through the primary target Porquero "C" and "D" intervals at a depth of 4,150 feet MD with TD estimated at 7,400 feet MD.
In the Santa Cruz block in the Catatumbo basin, the Phobos-1x well is currently drilling in the Paleocene Catatumbo formation at its expected TD of 9,847 feet MD. At this point the well has exhibited three intervals with oil shows in the Mirador and Barco formations. The Company is preparing to run wireline pressure and fluid tests across these prospective intervals.
In the Santos basin offshore Brazil, the Kangaroo-1 and Emu-1 exploration wells were drilled to a TD of 10,004 and 14,370 feet MD respectively. The Kangaroo-1 well discovered a 25 meter (82 foot) gross hydrocarbon-bearing section in the Eocene, announced in news releases on January 24 and January 30, 2013. Wireline logs, pressure data and fluid sample analysis confirmed the presence of 42° API oil in two separate intervals. The Company and its partner Karoon Gas Australia Ltd. ("Karoon") are proceeding with plans to drill an appraisal well to further delineate the extent of the Kangaroo Eocene oil discovery.
The Emu-1 exploration well was plugged and abandoned after logging and pressure data confirmed thin streaks of sands with very low permeability in the Santonian section and water bearing sands in the Eocene section. Both oil and gas shows were reported during drilling of the Eocene and Santonian sections.
This week Karoon spud Bilby-1, the third exploration commitment well. The Company has elected to execute its option to participate in this well.
In the onshore Ucayali-Marañón basins mobilization of the rig to drill the Yahuish-1x well on Block 138 is currently underway and the well is expected to be spud in mid-April. In Block 135, the Company has completed 25% of a 789 km 2D seismic acquisition program. The field processing of this seismic indicates the presence of large structures involving Cretaceous and Pre-Cretaceous units.
In Block Z-1, located in the offshore Tumbes basin, the Company has finished the acquisition of 429 Km2 of 3D seismic data. The data is currently being merged and processed together with the 1,143 Km2 3D seismic survey previously acquired by BPZ Resources Inc., operator of the block. The preliminary field processing of this 3D seismic data looks promising.
Pacific Rubiales, a Canadian company and producer of natural gas and crude oil, owns 100% of Meta Petroleum Corp., which operates the Rubiales, Piriri and Quifa heavy oil fields in the Llanos Basin, and 100% of Pacific Stratus Energy Colombia Corp., which operates the La Creciente natural gas field in the northwestern area of Colombia. Pacific Rubiales has also acquired 100% of PetroMagdalena Energy Corp., which owns light oil assets in Colombia, and 100% of C&C Energia Ltd., which owns light oil assets in the Llanos Basin. In addition, the Company has a diversified portfolio of assets beyond Colombia, which includes producing and exploration assets in Peru, Guatemala, Brazil, Guyana and Papua New Guinea.
The Company's common shares trade on the Toronto Stock Exchange and La Bolsa de Valores de Colombia and as Brazilian Depositary Receipts on Brazil's Bolsa de Valores Mercadorias e Futuros under the ticker symbols PRE, PREC, and PREB, respectively.
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Cautionary Note Concerning Forward-Looking Statements
This press release contains forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding estimates and/or assumptions in respect of production, revenue, cash flow and costs, reserve and resource estimates, potential resources and reserves and the Company's exploration and development plans and objectives) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; the possibility that actual circumstances will differ from the estimates and assumptions; failure to establish estimated resources or reserves; fluctuations in petroleum prices and currency exchange rates; inflation; changes in equity markets; political developments in Colombia, Peru, Guatemala, Brazil, Papua New Guinea or Guyana; changes to regulations affecting the Company's activities; uncertainties relating to the availability and costs of financing needed in the future; the uncertainties involved in interpreting drilling results and other geological data; and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's annual information form dated March 13, 2013 filed on SEDAR at www.sedar.com. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.
In addition, reported production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this press release due to, among other factors, difficulties or interruptions encountered during the production of hydrocarbons.
All dollar amounts in this news release are expressed in U.S. dollars ($), unless otherwise stated.
This news release was prepared in the English language and subsequently translated into Spanish and Portuguese. In the case of any differences between the English version and its translated counterparts, the English document should be treated as the governing version.
|Bcf||Billion cubic feet.|
|Bcfe||Billion cubic feet of natural gas equivalent.|
|bbl||Barrel of oil.|
|bbl/d||Barrel of oil per day.|
|boe||Barrel of oil equivalent. Boe's may be misleading, particularly if used in isolation. The Colombian standard is a boe conversion ratio of 5.7 Mcf:1 bbl and is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.|
|boe/d||Barrel of oil equivalent per day.|
|Mboe||Thousand barrels of oil equivalent.|
|MMboe||Million barrels of oil equivalent.|
|Mcf||Thousand cubic feet.|
|WTI||West Texas Intermediate Crude Oil.|
SOURCE Pacific Rubiales Energy Corp.