Pacific Rubiales Announces Strategic Alliance with Maurel et Prom in Colombia

Mar 31, 2011, 03:00 ET from Pacific Rubiales Energy Corp.

TORONTO, March 31 /PRNewswire-FirstCall/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC) announced today the acquisition of 50% of the interests held by Maurel et Prom (Euronext Paris: MAU.FP) in the Sabanero, Muisca, SSJN-9, CPO-17 and COR-15 blocks, which are all located on-shore in Colombia.

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Mr. Ronald Pantin, Chief Executive Officer of the Company, commented: "We are very pleased to join forces with Maurel et Prom. This acquisition adds significant resources and exploratory potential to our already robust resource base. Moreover, this acquisition fits synergistically with our other assets located in the same basins, paving the way to significant efficiencies in production and transport. With this acquisition we continue raising the bar as the premier explorer and operator in Colombia."

Upon completion of the transaction, Pacific Rubiales will partner with Maurel et Prom in respect of the following interests:

    -   100% participation in the Sabanero Block ("E&P Contract # 17 of
        2007 Sabanero") located in the central region of Colombia in the
        Department of Meta.

    -   100% participation in the Muisca Block ("E&P Contract # 20 of 2008
        Muisca") located in the central region of Colombia in the Departments
        of Boyaca and Cundinamarca.

    -   50% participation in the SSJN-9 Block ("E&P Contract # 47 of 2008
        SSJN- 9") located in the northern region of Colombia in the
        Departments of Bolivar, Cesar and Magdalena. The remaining 50%
        interest is currently held by HOCOL.

    -   50% participation in CPO-17 Block ("E&P Contract # 40 of 2008
        Llanos Orientales - Area Occidental CPO-17") located in the central
        region of Colombia in the Department of Meta. The remaining 50%
        interest is currently held by HOCOL.

    -   100% participation in the COR-15 Block ("Special Technical Evaluation
        Agreement Type 3 Contract") located in the central region of Colombia
        in the Department of Boyaca.

This agreement is subject to legal and regulatory approvals of the ANH and certain contractual approvals with the partners in Colombia.

    The general terms of the agreement with Maurel et Prom are as follows:

    -   Pacific Rubiales will pay to Maurel et Prom cash consideration to a
        maximum of US$66 million as a reimbursement for past exploration
        costs in the blocks, as at March 31, 2011.

    -   Pacific Rubiales will assume a full carried obligation on the
        exploration and delineation activities in the Sabanero Block with a
        reimbursement out of the free cash flow. The Company will also secure
        the financing required by Maurel et Prom to execute its portion of
        the development activities in such block. Reimbursement will also be
        made by means of free cash flow derived from future hydrocarbon
        production.

    -   Pacific Rubiales offers to assume a full carried obligation of up to
        US$120 million in three years for exploration activities in the SSJN-
        9, CPO-17 and Muisca Blocks. This obligation will be subject to
        revisions pending the activity results and negotiations with the
        other applicable partners.

    -   Pacific Rubiales will assume a full carry obligation on exploration
        activities for Block COR-15, with reimbursement by means of free cash
        flow derived from future hydrocarbon production. The Company will
        also secure the financing required by Maurel et Prom to execute its
        portion of the development activities in such block. Reimbursement
        will also be made by means of free cash flow derived from future
        hydrocarbon production.

    Synergies

The Sabanero and CPO-17 Blocks are located in the Llanos Basin, neighbouring the Rubiales and Quifa fields. The Sabanero Block adjoins the Quifa Block on the northeast and CPO-17 Block adjoins the CPE-6 Block on the west.

The Sabanero Block covers 43,400 hectares and three wells have already been drilled in the block. The Sabanero-1 well found 12 degrees API oil with strong water drive which will facilitate production in the C7 formation. This discovery correlates with the eastern extension of the discoveries made by the Company in Quifa North at the Q and F prospects.

The CPO-17 Block is located in the new heavy oil area of the Llanos basin, in the same trend of the Rubiales-Quifa-CPE-6 and Cano Sur Blocks. The CPO-17 Block covers 210,300 hectares and a grid of 680 km 2D seismic has already been acquired and processed. A stratigraphic well drilled in early 2011 found heavy oil in the basal Carbonera Formation sandstone which is the same unit that also contains oil in the Guairuro wells of the CPE-6 Block.

The Muisca Block covers 232,000 hectares in the Eastern Cordillera Basin, just 70 km away from Bogota, with 20 degrees API crude and gas discoveries in the 1960's (very close to existing gas markets in the capital region). The Nemqueteba gas prospect will be drilled by mid-2011.

The COR-15 Block surrounds the existing 18 degrees API Bolivar oil field which produces from Cretaceous strata. This block is located just south of the COR-24 Block, which was awarded to Pacific Rubiales during the 2010 ANH bidding round.

The SSJN-9 Block covers 264,800 hectares and it is located 60 km east to the La Creciente gas field in the lower Magdalena basin. This area is mostly gas-prone, but with around 25% probability of light oil. The Company is planning to apply the geological model of La Creciente to this block such that similar plays can be mapped and new discoveries can be made taking into account the synergies with respect to the Company's existing and future infrastructure in the area. The Lower Magdalena basin is strategic for the Company's gas exploration and production activities, where a 100 MMbcf gas production capacity is available at different blocks of Pacific Rubiales. In addition to La Creciente, the Company has the rights with respect to SSJN-3, SSJN-7 and Guama, all of which are currently undergoing exploration activities.

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 and Piriri oil fields in the Llanos Basin in association with Ecopetrol S.A., the Colombian national oil company. 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 a current net production of approximately 88,000 barrels of oil equivalent per day, after royalties, with working interests in 40 blocks in Colombia, Peru and Guatemala.

The Company's common shares trade on the Toronto Stock Exchange and La Bolsa de Valores de Colombia under the ticker symbols PRE and PREC, respectively.

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.

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 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 10, 2011 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.

SOURCE Pacific Rubiales Energy Corp.