NEWSROOM

TORONTO, Jan. 8, 2013 /CNW/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) announced today its capital spending plans for 2013.  The Company plans to spend $1.7 billion this year in exploration and development (E&D) expenditures, an increase over spending in 2012, reflecting a larger exploration budget and increased development drilling.  Pacific Rubiales expects to release its year-end 2012 audited results on March 13, 2013. All values in this release are in U.S.$ unless otherwise stated.

The Company is targeting 15 to 30% growth in average daily production for 2013 and has scheduled a conference call at 8:00 a.m. ET (Toronto and Bogotá time) / 11:00 a.m. (Rio de Janeiro time) on Wednesday January 9, 2013 to discuss its 2013 Outlook and Guidance.  Analysts and interested investors are invited to participate using the dial-in instructions available at the end of this news release.

"Our plans for 2013 are shaped by our expanded exploration portfolio and oil focused production that continues to grow and enjoy strong netbacks and robust economics," said Ronald Pantin, Chief Executive Officer of Pacific Rubiales. "During 2012, we transitioned the Company's portfolio through select strategic acquisitions, to setup and secure long-term growth through early stage large resource capture, and by adding value to the existing business through accretive reserves and production development and acquisitions. Although Colombia remains the Company's core producing area and the focus of most of its activities and expenditures in 2013, we are taking our first major steps outside its borders, with a significant high impact well program planned for Peru, Guatemala, Brazil and Papua New Guinea.

"The Company estimates that it will achieve average production net after royalties of approximately 99 Mboe/d in 2012 (including volumes attributed to the Company's acquisition of Block Z-1 in Peru).  Despite being at the low end of our guidance range, this was a very strong performance given the largely flat production through the first eight months of the year caused by unexpected permit delays in Colombia.  Exit production in 2012 was an estimated 293 Mboe/d total gross field (average last week in December) or approximately 117 Mboe/d net after royalty (excluding volumes from the C&C Energia Ltd. acquisition which closed on December 31, 2012), an increase of approximately 17% from 2011's exit production and exceeding our targets of 280 to 285 Mboe/d gross total field (112 to 114 Mboe/d net after royalty).

"It is likely that 2013 production growth for Pacific Rubiales and other companies in Colombia will continue to be affected by the pace of environmental permitting approval.  However, in an attempt to take a prudent and realistic view on this issue over which we have no control, we are starting the year by targeting 15 to 30% overall average production growth in 2013.  The Company has a stronger than expected beginning to 2013 as we are currently producing above Plan at approximately 310 Mboe/d gross total field or 129 Mboe/d net after royalty (including the acquired C&C Energia Ltd. volumes), and we expect to be able to update the range as the year progresses. 

"Production at the Company's landmark Rubiales and Quifa heavy oil fields (including the Cajua new commercial field area in Quifa North) is expected to continue to grow.  First oil production is expected from Block CPE-6, during the second half of the year, after receipt of the blanket environmental permit.  The Block Z-1 asset and the blocks acquired from C&C Energia Ltd. which both closed at year-end 2012, are expected to contribute significant light oil production volumes in 2013.

"Our oil price realizations and operating netbacks strengthened in 2012 and the Company expects to achieve an operating netback on its oil production exceeding $65/bbl on average WTI prices of approximately $94, generating an estimated EBITDA of $2.1 billion in 2012.  In 2013 we expect to generate EBITDA in the range of $2.5 to $2.8 billion in an expected WTI oil price environment of $85 to $90.

"In summary, Pacific Rubiales enters 2013 on a very solid financial standing, our Balance Sheet remains strong and our growth targets in the medium term are underpinned by our extensive low cost and high return heavy oil exploration and development assets in Colombia.  We have stepped beyond Colombia, building first production in Peru and layering in future longer-term production potential through the exploration bit.  I am looking forward to an exciting year in 2013 as we continue our strategy of repeatable, profitable growth, building for the long-term future, the leading E&P company focused in Latin America."

Highlights of the 2013 capital program include:

In 2013, we expect to have total E&D capital expenditures of $1.7 billion, an increase of approximately 30% over estimated 2012 expenditures, largely driven by the expanded exploration activities outside Colombia and increased development drilling in Colombia and Peru.  The capital program is expected to be funded by internally generated cash flow, in an expected WTI oil price environment of $85 to $90, and consists of the following major expenditures:

• $495 million in exploration, a significant increase over 2012 reflecting a larger number of planned wells in frontier and offshore basins outside of Colombia.  The Company plans to drill approximately 35 gross exploration wells (including appraisal and stratigraphic wells) and acquire 4,682 km and 1,040 km² of 2D and 3D seismic data respectively.  The planned well program includes 15 wells in blocks along the Company's core heavy oil belt in the southern Llanos basin, Colombia.  In total, approximately 19 wells are targeting high impact prospects, including the Company's first exploration wells in Peru, Brazil, Guatemala and Papua New Guinea.  A table of planned gross and net exploration wells is available at the end of this news release.
• $520 million in development drilling with a total of 283 gross wells planned (excluding work-overs and water injector wells), and with activity driven by development of the Cajua field (new commercial field area in Quifa North), continued on-going infill drilling in the Quifa SW and Rubiales fields, stepped up light oil development in the Cubiro block in Colombia, and a significant program of development drilling on Block Z-1 in Peru.  A table of planned gross and net development wells is available at the end of this news release.
• $555 million in facilities and infrastructure, with approximately 85% directed to the Company's core producing Rubiales, Quifa SW, Cajua and Sabanero¹ heavy oil fields, and the remainder for the planned development of the CPE-6 block, as well as other mostly light oil field developments in Colombia.

¹The Company holds a 49.999% participation in Maurel et Prom Colombia B.V., which indirectly owns a 49.999% working interest in the Sabanero block.

Colombia

Colombia will remain the predominant focus of the Company's activities and capital expenditures in 2013 with $1.2 billion in total E&D capital allocation, including exploration, development and facilities expenditures.  Of that amount, $300 million will be directed to the drilling of 31 gross exploration wells, seismic and other G&G expenditures.  Exploration wells of particular interest include high impact wells on the La Creciente, SSJN-7, Cordillera-15, Muisca, CPE-6 and Tacacho blocks.

Development drilling expenditures will account for another $390 million, which will be directed to the drilling of 274 gross wells: about 125 planned for the Rubiales field, 80 at Quifa SW, 45 at Cajua, and the remainder on the Company's light oil blocks.

All of the $555 million of planned facility and infrastructure expenditures will be spent in Colombia, roughly level with facilities expenditures in 2012.  The majority of the expenditures will be directed to the Company's heavy oil producing Rubiales, Quifa, and Cajua fields including flowlines, power grid distribution, oil dehydration and water treatment facilities required to handle increasing volumes of water production in these fields.  Funds will also be directed to early development facilities at CPE-6 and the Company's light oil fields.  The Company operates the vast majority of its Colombia blocks and activities.

Peru

Capital expenditures in Peru is expected to range between $190 million to $200 million in 2013, with approximately 70% of this directed to development activities on Block Z-1, including the drilling of eight development wells.  There will also be planned exploration expenditures of between $60 to $70 million directed to the drilling of the first well in the high impact Block 138 during the first quarter 2013, along with seismic acquisition and other G&G expenditures on blocks 135, 137, 116 and the exploration areas of Block Z-1, through the year.

Brazil

Capital expenditure in Brazil is expected to range between $85 to $90 million in 2013, all directed to the drilling of two high impact exploration wells on the Karoon offshore Santos Basin, expected during the first half of the year.

Other

Capital expenditures of between $15 million to $20 million are expected on the Company's blocks in Guatemala in 2013, including expenditures directed to the drilling of one exploration well plus seismic and other G&G activities.

Additional capital spending of between $30 million to $35 million are associated with the Company's participation in exploration activities in Papua New Guinea, including its share of the costs of drilling two planned appraisal wells on the Triceratops structure.

(1)The Company holds a 49.999% participation in Maurel et Prom Colombia B.V. which holds 100% of the Sabanero and Cor-15 blocks and 50% of the CPO-17 and SSJN-9 blocks
(2)The Company holds a 40% participating interest in the Portofino block owned by Canacol Energy Inc.

(1)Excludes existing well bore work-overs and drilling of injector wells
(2)Development wells on various light oil blocks (including: Abanico, Cubiro, Carbonera, Cravoviejo, Cachicamo, Llanos 19)

Exploration Update

During December 2012, the Company focused its exploration activity in the in the eastern Llanos and Lower Magdalena basins in Colombia, and in the Santos basin, offshore Brazil.  Four exploration wells were drilled, one each in the Sabanero and SSJN-9 blocks, and two on the CPO-12  block.  Also in the month of December, four exploration wells started drilling, one each on the CPO-1, CPO-12 and Guama blocks in Colombia and on the Karoon blocks in Brazil, all of which are expected to reach final depth and their operations during January or February 2013.

The Chaman-1 exploration well in the northeastern part of the Sabanero Block, resulted in a new oil discovery and is currently under production test.

In the SSJN-9 block, located in the Lower Magdalena Valley basin, Maurel et Prom Colombia, the operator of the block, drilled the Santa Fe-1 exploration well.  The well was dry and it was plugged and abandoned.

In the CPO-12 block, two exploration wells were drilled as part of the exploration commitments with the ANH: The Espiguero-1X well was drilled in the southeastern border of the block, encountered two feet of net pay and the wellbore was plugged and abandoned as uneconomic. The Escarabajo-1X well was drilled in the northwestern border of the block. The well showed hydrocarbon traces in the interval of interest but the petrophysical evaluation did not show any commercial discovery, and the well was plugged and abandoned. The third commitment well, the Hayuelo-1X exploration well is currently being drilled, targeting the basal sands of the Carbonera Formation, and is expected to reach final depth during the second week of January.

In the CPO-1 block, the Altillo Oeste-1 exploration well is currently being drilled, targeting sands in the Eocene Mirador Formation as its main exploration objective.

In the Guama block, the Manamo-1X exploration well started drilling during the second week of December and it is expected to reach final depth during January 2013.

The Kangaroo-1 exploration well within blocks S-M-1101 and S-M-1165 in offshore Brazil commenced drilling at the end of December 2012.  The well has multiple targets in the late Cretaceous, Eocene and Miocene rocks, and its drilling operations are expected to continue into February 2013.

2013 Outlook and Guidance Conference Call

The Company has scheduled a conference call for investors and analysts on Wednesday January 9, at 8:00 a.m. (Toronto and Bogotá time) / 11:00 a.m. (Rio de Janeiro time), to discuss the Company's 2013 Outlook and Guidance. 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):

Participant Number (International/Local):  (647) 427-7450
Participant Number (Toll free Colombia):  01-800-518-0661
Participant Number (Toll free North America):  (888) 231-8191
Conference ID (English Participants):   82827621
Conference ID (Spanish Participants):   82848382

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), January 23, 2013, which can be accessed as follows:

Encore Toll Free Dial-in Number: 1-855-859-2056
Local Dial-in-Number:   (416) 849-0833
Encore ID (English Participants):  82827621
Encore ID (Spanish Participants): 82848382

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.

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.

Translation

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.

Definitions 

SOURCE: Pacific Rubiales Energy Corp.