NEWSROOM

TORONTO, Aug. 8, 2012 /CNW/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) announced today the release of its unaudited consolidated financial results for the quarter ended June 30, 2012, together with its Management Discussion and Analysis ("MD&A") for the corresponding period. These documents will be available on the Company's website at www.pacificrubiales.com and on SEDAR at www.sedar.com. All values in this release are in US$ unless otherwise stated.

The Company has scheduled a teleconference call for investors and analysts on Thursday August 9^th, 2012 at 8:00 a.m. (Bogotá time) / 9:00 a.m. (Toronto time) / 10:00 a.m. (Rio de Janeiro time), to discuss the Company's second quarter results. Analysts and interested investors are invited to participate using the dial-in instructions available at the end of this news release.

Second Quarter 2012 Highlights

• EBITDA increased to a record $560 million ($1,098 million for the first six months, an increase of 19% compared to the same period in 2011), driven by production growth and higher netbacks.
• Net Earnings of $224 million ($483 million for the first six months, an increase of 73% compared to the same period in 2011).
• Adjusted Net Earnings from Operations of $187 million ($480 million for the first six months, an increase of 20% compared to the same period in 2011).
• Operating netbacks from oil and gas production of $63.12/boe, an increase of 2% over the second quarter 2011, despite a 9% decrease in WTI benchmark oil prices.
• Sales volumes increased to a record 117 Mboe/d (108 Mboe/d for the first six months, an increase of 13% compared to the same period in 2011).
• Total production net of royalties of 92,611 boe/d including 1,740 bbl/d* attributed from the acquisition in Peru (93,092 boe/d for the first six months, an increase of 11% compared to the same period in 2011).
• Total capital expenditures of $316 million compared to $308 million in the same period in 2011, with 38% ($121 million) invested in production facilities, 35% ($111 million) in exploration and, 20% ($64 million) in development drilling.
• Exploration success of 82% from drilling a total of 22 gross exploratory wells of which 18 were successful.
• Significant and material acquisitions aligned with the Company's long-term growth strategy, including new production in Peru and Colombia, and new exploration acreage and resources in Colombia, offshore Guyana and onshore Papua New Guinea.
• Authorization of the environmental license for increased water injection in Rubiales oil field which will allow oil production ramp-up in the field.
• Agreement in principle from Ecopetrol for a declaration of commerciality of a portion of the Quifa North oil field which will allow the Company to move the field into development and ramp-up production, once it is formally approved by the Association's Executive Committee, the next week.
• Standard and Poor's Rating Services revised its outlook for the Company from "Stable" to "Positive" while affirming the Company's BB corporate rating and its BB senior unsecured debt rating; providing a strong endorsement of the Company's financial and operational strength, and continuing execution on its production and reserve growth targets.
• In the second quarter of 2012, the Company paid a cash dividend of $0.11 per share, to shareholders of record.

Ronald Pantin, Chief Executive Officer of the Company commented:

"The second quarter was very strong from a financial results standpoint, with oil and gas sales revenues and sales volumes, EBITDA, and funds flow from operations, at record levels despite year-on-year and sequential 9% and 10% respectively, drop in WTI benchmark oil prices.

Despite pipeline transportation disruptions affecting the O&G Industry in Colombia during the second quarter, Pacific Rubiales was able to deliver all of its production without any disruptions. This illustrates the strategic importance and value of the proactive investments the Company has made in midstream infrastructure.

Year-to-date production continues to grow but not as rapidly or as much as we anticipated when we first laid out the operating plan and guidance at the beginning of the year. The 2012 guidance we provided in early January this year of 15 - 35% growth in average net production was based on a realistic expectation around the pace of Colombia's licensing issuance. But license delays have been much longer than was anticipated and delays have now become an issue affecting all Industry producers.

In the case of Pacific Rubiales it is important to recognize that so far the delay in the licensing has only represented a delay in development, rather than a loss of production. Receiving the Rubiales water injection licence today, removes some but not all of the remaining uncertainty around our 2012 production range, allowing us to revise our guidance parameters. At this point we are confident  that the Company will meet its production guidance range, including production volumes coming from the PetroMagdalena acquisition that closed on July 23, and from its 49% deemed participating share attributed from block Z-1 in Peru effective from January 1, 2012. The Company's net after royalty production including PetroMagdalena and Peru volumes hit a new record this week exceeding 100 Mboe/d.

I am particularly pleased with the significant strategic steps the Company has made thus far this year through a number of asset acquisitions and other strategic investments. This includes our plans to export LNG from northern Colombia, the first such project in Columbia, allowing us to accelerate and unlock value from our large natural gas reserves and resources in the country. In addition, our participation in the building of a new oil export terminal on the Colombia Caribbean coast at Puerto Bahia will ensure export facilities to support an expected doubling of our Colombia oil production in the next five years.

We have acquired new and growing production in Peru through the 49% participating interest in block Z-1, and in Colombia through the 100% acquisition of PetroMagdalena. The latter provides a reliable and growing source of light oil diluent required for our rising heavy oil production in Colombia. Both were acquired on an accretive basis, will add significant reserves and resources, while offering considerable exploration and development upside.

On the exploration front, we acquired a 40% participating interest in the onshore Portofino exploration block which lies along the same trend as the giant Rubiales/Quifa and Castilla/Chichemene heavy oil fields, adjacent and on-trend to the developing Capella oil field. The Portofino block establishes the Company as one of the largest exploration acreage holders as well as the largest producer along the under-explored and under-developed heavy oil resource trend in Colombia.

The Company is stepping outside of Colombia with its increased investment in CGX Energy Inc. (currently 35% with an option to increase to 41% and a farm-in on the next two exploration wells) with its very large exploration acreage position in offshore Guyana; and the acquisition of a 10% net participating interest in the PPL-237 exploration block onshore Papua New Guinea containing the large Triceratops natural gas and condensate discovery.

Both the Guyana and Papua New Guinea exploration acquisitions should be viewed in the context of early stage large resource capture for the future. We view both as representing world class hydrocarbon basins with the potential for hosting very large resources. In the case of Papua New Guinea, large natural gas and condensate resource sitting on the doorstep of the world's fastest growing primary energy markets; and in the case of offshore Guyana, a basin with analogous geology to west Africa and Brazil that have produced giant oil discoveries. This is a similar strategy that led to the Company's successful "first-mover", large resource capture and rapidly rising production along the heavy oil resource trend in Colombia.

Each of these acquisitions have been funded by cash on hand, while associated exploration and development capital are expected to be funded by internally generated cash flow. These acquisitions represent a transformational move for the Company and illustrate the Company's capacity to look out far beyond the short and medium term, layering in opportunities to support, enhance and develop new growth prospects into the future.

In this uncertain economic environment, the Company's Balance Sheet remains strong; our growth targets in the medium term remain intact underpinned by our extensive low cost heavy oil exploration and development assets in Colombia. We will continue our strategy of repeatable and profitable growth by building for the long-term future, the leading E&P Company focused in Latin America."

Financial Summary

A summary of the financial results for the three months and six month ended June 30, 2012 and 2011 are as follows (a more detailed discussion and analysis can be found in the MD&A):

Operating Crude Oil and Natural Gas Netbacks

The Company produces and sells crude oil and natural gas. It also purchases crude oil from third parties as diluents and for trading purposes, which are included in the reported "daily volume sold". The combined crude oil and natural gas operating production netback during the quarter ended June 30, 2012 was $63.12/boe, 2% higher than the same period in 2011 despite a 9% decrease in WTI benchmark oil prices, driven primarily by reduced total operating costs and higher sales price differentials.

Operating netbacks for the quarters ending June 30, 2012 and 2011 are as follows (a more detailed discussion and analysis along with segmented first quarter netbacks can be found in the MD&A):

Production Summary

The Company produces crude oil and natural gas from a number of different fields, 98% of which are located in Colombia. The Company operates most of its production. The average net after royalty production during the quarter ended June 30, 2012 was 92,611 boe/d including 1,740 bbl/d* attributed to the recent acquisition in Peru, 3% higher than the same period in 2011.

Average production for the Company's major producing fields for the three months ended June 30, 2012 and 2011 are as follows (a more detailed discussion and analysis can be found in the MD&A):

Second Quarter Conference Call Details

The Company has scheduled a teleconference call for investors and analysts on Thursday August 9^th at 8:00 a.m. (Bogotá time) / 9:00 a.m. (Toronto time) / 10:00 a.m. (Rio de Janeiro time), to discuss the Company's second quarter results. Analysts and interested investors are invited to participate using the dial-in numbers as follows (a presentation will be posted on the Company's website at: www.pacificrubiales.com prior to the call):

The conference call will be webcast which can be accessed through the following link: http://www.pacificrubiales.com.co/investor-relations/webcast.html.

A replay of the call will be available until 23:59 pm (Toronto time), August 23, 2012, which can be accessed as follows:

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.

Average Daily Oil Production - Block Z-1 Peru

Peru production referenced in the news release corresponds to the 49% deemed participating share of production attributable to the Company from Block Z-1 for the period January 1 through June 30, 2012, pursuant to a Stock Purchase Agreement ("SPA") signed on April 27, 2012 between the Company and BPZ Resources, Inc. ("BPZ").  Under the SPA (i) at closing operating revenues and expenses will then be allocated to each partner's respective participating interest and (ii) once approvals by the relevant Peruvian authorities are granted, the Company shall receive a 49% interest in the production of hydrocarbons from the Z-1 Block. No revenue and costs have been recognized yet in the Company´s results with respect to the production from Block Z-1 as its full entitlement is subject to approval of the applicable Peruvian authorities.

Average Daily Oil Production - Block Z-1 Peru

Peru production referenced in the news release corresponds to the 49% deemed participating share of production attributable to the Company from Block Z-1 for the period commencing January 1 to June 30, 2012, pursuant to a Stock Purchase Agreement (the "SPA") signed on April 27, 2012 between the Company and BPZ Resources, Inc. ("BPZ").  Under the terms of the SPA: (i) at closing, operating revenues and expenses will then be allocated to each partner's respective participating interest; and (ii) once approvals by the relevant Peruvian authorities are granted, the Company shall receive a 49% interest in the production of hydrocarbons from the Z-1 Block effective as of January 1, 2012. No revenues or costs have been recognized yet in the Company´s financial results with respect to the production from Block Z-1 as its full entitlement is subject to approval of the applicable Peruvian authorities.

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 

*See reference to "Average Daily Production - Block Z-1 Peru" in the Advisories section of this news release. 

SOURCE: Pacific Rubiales Energy Corp.