Pacific Rubiales Provides Operational Update: Receives Water Injection Licence at the Rubiales Field, Announces New Strategic Partner in Pacific Infrastructure, and Provides Karoon's Updated Kangaroo-1 Contingent Resource
TORONTO, Aug. 6, 2013 /PRNewswire/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) today provided an update on its current operating activities. These include: (1) the receipt of the environmental licence required to increase water injection at the Rubiales field by an additional 1 MMbbl/d, allowing the Company to grow oil production in the field; (2) the announcement that International Finance Corporation ("IFC"), a member of the World Bank Group, has invested U.S.$150 million in Pacific Infrastructure Venture Inc. ("Pacific Infrastructure"); and (3) an update from Karoon Gas Australia Ltd. ("Karoon"), on Contingent Resources associated with the Kangaroo-1 exploration well.
Ronald Pantin, Chief Executive Officer of the Company, commented:
"Receiving the licence for additional water injection is significant to the Company because it will allow us to increase oil production in the Rubiales field to a target level of approximately 220,000 bbl/d gross total field production by the end of this year, increasing from the 210,159 bbl/d gross total field production (70,495 bbl/d net production after royalties) during the first quarter of the year. The necessary water injection facilities have already been built, which will allow us to increase oil production relatively quickly.
"The Rubiales field provides an important source of revenue for our Company, our partner Ecopetrol, S.A. ("Ecopetrol") and for Colombia, in the form of royalties, taxes and spin-off economic activity. We would like to again acknowledge the efforts that the Colombian environmental authority, Autoridad Nacional de Licencias Ambientales ("ANLA"), has made to improve and streamline the licencing process including the new resolution of July 31, 2013 ratifying an expedited process to allow minor changes to existing environmental licences. We look forward to working with them to obtain the necessary licence required for the further exploration and development of the Company's CPE-6 Block, southwest of the Rubiales field.
"We are very pleased to have an investing partner of the stature of the IFC joining us in Pacific Infrastructure. This is the first IFC equity investment in an infrastructure project in Colombia and the largest greenfield equity investment by IFC globally. The investment provides an important endorsement of Colombia's stable and growing economic and business environment and confirms the vision and strategic importance of Pacific Infrastructure's Puerto Bahía import-export terminal and the OLECAR pipeline projects which are currently underway.
"Pacific Rubiales has made significant investments in Colombia's infrastructure over the last five years, which have enabled it to control the timing and pace of its oilfield developments, and capture additional components of the value chain. Pacific Infrastructure's assets are strategic to the Company's plans to substantially increase its oil production and export sales from Colombia over the next three years and will reduce the current dependence on Coveñas, the sole oil export terminal on the Colombian Caribbean coast.
"On the exploration side of the business, our partner and operator of the block, Karoon, provided an update on their internal estimate of Contingent Resources associated with the Kangaroo-1 exploration well. Their management estimate of 2C Contingent Resources (denotes "Best Case Estimate") has increased 85%, based on new core analysis and reservoir fluid data. This is an encouraging development and further supports the appraisal drilling program planned for 2014."
Rubiales Field Water Injection Licence
The Colombian environmental authority, ANLA, has granted Pacific Rubiales the environmental licence required to increase water injection at the Rubiales field by an additional 1 MMbbl/d, allowing for growth in oil production by year-end. The Rubiales field is the largest producing oil field in Colombia with over 210,000 bbl/d gross total field production. Pacific Rubiales has a working interest of approximately 42% and is the operator of the field. The Colombian national oil company, Ecopetrol, holds the remainder of the working interest.
In addition to the water injection licence just received, the Company will also use an irrigation project to dispose of the increasing volumes of water produced from both the Rubiales and Quifa fields. At the irrigation project, the water produced from the existing separation process will be treated through reverse osmosis facilities and used for agroforestry, as opposed to being re-injected. The project, which is currently under construction, is expected to start-up late in the fourth quarter of 2013 and will positively contribute to the Company's cash flow, reducing the cost of handling incremental produced water from these fields. This project will also bring shared value to local communities, creating agriculture related jobs and sustainable development in these areas.
New Partner in Pacific Infrastructure
Pacific Infrastructure, a private company in which Pacific Rubiales currently holds a 56.9% interest, has entered into an agreement with IFC, pursuant to which IFC has agreed to invest U.S.$150 million into Pacific Infrastructure. Pursuant to the terms and conditions in the agreement, IFC will obtain a 27.2% equity interest in Pacific Infrastructure and Pacific Rubiales will hold a 41.4% interest.
Pacific Infrastructure is focused on improving Colombia's oil and gas export infrastructure. IFC's investment will be used to develop the company's key assets, which include Puerto Bahía and OLECAR. Puerto Bahía is a greenfield liquids import-export terminal with a 3.3 MMbbl storage and cargo handling facility located on the bay of Cartagena, one of the largest trade hubs in Latin America. The OLECAR pipeline project is a 130 kilometer 30 inch crude oil pipeline with an initial transportation capacity of 300 Mbbl/d that will connect Puerto Bahía's facilities with Colombia's principal crude export terminal in Coveñas. These assets will reduce bottlenecks, the dependence on a single export terminal and facilitate increased access to international markets. With the closing of the IFC investment, Pacific Infrastructure is in a position to acquire debt financing of approximately $350 million in order to proceed with the next stage of development.
Pacific Rubiales has actively invested in pipelines, ports and other infrastructure facilities over the past five years, allowing it to manage the pace of its production growth and capture additional value. The Company is planning to spin out a portion of these assets, keeping operational control, to create additional value for shareholders.
Kangaroo-1 Contingent Resource Update
In a news release dated August 1, 2013, Karoon, operator of five exploration blocks in the Santos Basin offshore Brazil (where Pacific Rubiales holds a 35% participating interest), provided an update (effective July 29, 2013) on their internal management estimate of Contingent Resources associated with the Kangaroo-1 discovery well. Their estimate of 2C Contingent Resources (denotes "Best Case Estimate") has been increased to 135 MMbbl from the previous estimate of 73 MMbbl, based on new core analysis and reservoir fluid data that establish an increased net-to-gross ratio through the reservoir zone, and a gross oil column expansion to 76 meters from the previous 25 meters. The 1C (denotes "Low Case Estimate") and 3C (denotes "High Case Estimate") Contingent Resources have been increased to 11 MMbbl and 487 MMbbl from 2 MMbbl and 337 MMbbl, respectively.
Karoon is currently working to secure a rig to drill a minimum of two appraisal wells to test the up-dip extension of both the Kangaroo and Bilby discoveries, and to drill an additional exploration well to test a separate structure on the blocks. These wells are expected to be drilled during 2014.
The foregoing information was provided by Karoon and the readers of this news release are encouraged to review the additional information regarding Contingent Resources estimation provided in the legal advisories below.
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.
Cautionary Note Concerning Forward-Looking Statements
This news 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, Guatemala, Peru, Brazil, Papua New Guinea and 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.
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.
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources have an associated chance of development (economic, regulatory, market and facility, corporate commitment or political risks). The estimates herein have not been risked for the chance of development. There is no certainty that the Contingent Resources will be developed and, if they are developed, there is no certainty as to the timing of such development or that it will be commercially viable to produce any portion of the Contingent Resources. It is not an estimate of volumes that may be recovered. Actual recovery is likely to be less and may be substantially less or zero.
In this news release, total volumes of Contingent Resources have been expressed for high case estimates, low case estimates and best case estimates. These estimates have been prepared by an internal independent resource evaluator employed by Karoon, the operator of the Kangaroo-1 exploration well, in a report effective July 29, 2013, based on Australian resource reporting standards which are substantially similar to the Canadian COGE Handbook. These total volumes are arithmetic sums of multiple estimates of Contingent Resources, as the case may be, which statistical principles may be misleading as to volumes that may actually be recovered. Readers of this news release should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class as follow:
- Low Case Estimate (1C) - Denotes low case estimate scenario of contingent resources. When applied to Kangaroo, the 1C resource is based on only the reservoir sands that directly intersected the oil column in Kangaroo-1 and excludes those sands in an up-dip location.
- Best Case Estimate (2C) - Denotes best estimate scenario of contingent resources. When applied to Kangaroo, the 2C resource includes the 1C resource and additional reservoir sands that were penetrated below the oil water contact at Kangaroo-1 but probably occur above the oil water contact in an up-dip location. This reservoir section was water wet at Kangaroo-1, but is mapped above the oil water contact up-dip over the Kangaroo field.
- High Case Estimate (3C) - Denotes high estimate scenario of contingent resources. When applied to Kangaroo, the 3C resource includes the 1C resource, 2C resource and additional reservoir sands that were penetrated below the oil water contact at Kangaroo-1 and are interpreted to possibly thicken significantly or have better reservoir properties above the oil water contact in an updip location. The reservoir section was water wet at Kangaroo-1, but can be mapped above the oil water contact up-dip over the Kangaroo field.
|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.