Pacific Rubiales Announces Acquisition of a Participating Interest in the Heavy Oil Prospective Portofino Exploration Block, Colombia

TORONTO, July 24, 2012 /PRNewswire/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) is pleased to announce that it has signed binding letters of agreement with Petrolera Monterrico S.A. Sucursal Colombia ("Petromont") to acquire a 40% participating interest and with Canacol Energy Ltd. (TSX: CNE) to acquire operatorship, of the onshore Portofino exploration block in Colombia.

The Portofino block has an area of approximately 1,047 km², and is located at the north-eastern corner of the Caguan-Putumayo basin in southern Colombia. The block is located within the heavy oil trend that hosts the giant producing fields of Rubiales/Quifa and Castilla/Chichemene, and on trend and adjacent to the developing Capella heavy oil field. The block contains one prospect with a management estimated P50 resource potential of 140 MMbbl and up to four additional leads with approximately 160 MMbbl.

Ronald Pantin, Chief Executive Officer of the Company, commented: "This is an exciting opportunity and an excellent fit with the Company's expertise in heavy oil development. Pacific Rubiales is already the largest operator and producer of heavy oil in Colombia and has one of the largest net land positions along the heavy oil resource trend. This acquisition adds to the existing portfolio, providing future growth potential to the Company."

The transaction consists of a US$23.5 million cash payment to Petromont which includes payment for past exploration costs, plus a US$2.2 million carry of their obligations related to an approved exploration work program. As part of the agreement, there is an additional carry obligation to finance certain production facilities and other activities required for the development of the block of up to US$45 million. This carry obligation will be recovered from the proceeds of production.

In a separate agreement, the Company will pay Canacol a cash consideration of US$3.7 million to assume operatorship of the block. Pacific Rubiales will be transferred operatorship of the block following the drilling of the next four wells.

The transaction is subject to government and regulatory approvals.

Pacific Rubiales, a Canadian-based company and producer of natural gas and heavy crude oil, owns 100 percent of Meta Petroleum Corp., a Colombian oil operator which operates the Rubiales, Piriri and Quifa oil fields in the Llanos Basin in association with Ecopetrol, S.A., the Colombian national oil company, and 100 percent of Pacific Stratus Energy Corp. which operates the La Creciente natural gas field. The Company is focused on identifying opportunities primarily within the eastern Llanos Basin of Colombia as well as in other areas in Colombia and northern Peru. Pacific Rubiales has working interests in 43 blocks in Colombia, Peru and Guatemala.

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.

Advisories

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, Guatemala or Peru; 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 14, 2012 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.

Boe Conversion

Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 5.7 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The estimated values disclosed in this news release do not represent fair market value. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Definitions 

SOURCE Pacific Rubiales Energy Corp.