TORONTO, July 11, 2013 /CNW/ - Pacific Rubiales Energy Corp. (TSX: PRE;
BVC: PREC; BOVESPA: PREB) is pleased to provide an update on its second
quarter 2013 operations and exploration activities, and the status of
certain of its pending Colombian permits. Local public hearings,
relating to the blanket exploration and development environmental
permit for the Company's CPE-6 block are expected to commence early
next month, with permit approval expected within three to six weeks
following the hearings.
In the second quarter of 2013, the Company expects:
To report continued strong production volumes, with production at the
top of its annual guidance range and operating netbacks on its oil
sales volumes of above $60/bbl, in-line with the first quarter of 2013.
Although gross production increased, net after royalty production is
expected to be at similar levels as reported in the first quarter of
2013, after accommodating the additional volumes associated with the
high-prices clause arbitration decision at Quifa SW ("PAP").
Early effects from its previously announced cost reduction initiatives
to be recognized in the form of a reduction in transportation and
Other highlights from the quarter:
Exploration well activity included four wells resulting in the
previously announced oil discovery in offshore Brazil and a natural
gas/condensate discovery in Colombia.
In June, the Company announced an increase of 50% to its quarterly cash
dividend to U.S. $0.165 per common share from the previous U.S. $0.110
per common share.
The Company expects to release its second quarter financial results
after markets close on Thursday August 8, 2013.
Ronald Pantin, Chief Executive Officer of the Company, commented:
"In early July, the Autoridad Nacional de Licencias Ambientales ("ANLA")
announced the implementation of a simplified environmental licensing
process for oil and gas operators in Colombia, which we expect to be
effective by the end of July. We believe this will improve the
timelines for the permitting process for our operations in Colombia.
"The most immediate impact to the Company relates to the pending
approval of a blanket exploration and development environmental permit
for the CPE-6 block in the southern Llanos Basin, which is located to
the southwest of the Rubiales and Quifa SW fields. The ANLA has
scheduled local public hearings for this permit for early August. The
Company expects to receive approval of the permit within a three to six
week period following the public hearings.
"We recognize the efforts the ANLA has made to enhance and streamline
the process to speed up licenses for oil producers in Colombia and we
look forward to working with them in the future.
"I am also pleased to announce that we have achieved another strong
quarter of operational performance. We expect reported net after
royalty production in the second quarter to be at similar levels as the
previous quarter (an increase of approximately 38% from the same period
a year ago), and completely accommodating the additional Quifa SW PAP
arbitration volumes (approximately 2.6 Mbbl/d), which starting in the
second quarter, are being paid entirely in kind, in the field.
"WTI benchmark pricing in the quarter remained relatively strong at
approximately $94.50/bbl compared to the previous quarter and the same
period a year ago, while Brent benchmark pricing fell to approximately
$103/bbl compared to almost $113/bbl in the previous quarter. With the
significant narrowing of the WTI - Brent differential, we expect
average price realization on our crude oil sales in the second quarter
to be in the range of $94 - $95/bbl.
"In the first quarter, we announced a plan to reduce our oil operating
costs by approximately $8/bbl on a pro-forma basis for the remainder
2013. The Company's financial and operating performance is expected to
benefit from certain initiatives and projects currently underway. This
is expected to have a major impact on costs in the second half of the
year, although a reduction in both transportation and diluent costs was
realized in the second quarter and is expected to positively impact
operating netbacks. Operating netbacks on oil in the second quarter are
expected to be in the range of $60 - $61/bbl.
"The Company's diluent costs are expected to decrease by approximately
30% in the second quarter 2013 compared to the previous quarter, and by
over 40% compared to the same period a year ago. The reduction in
diluent costs is mainly driven by the increased use of our own light
oil crude for diluent (and less purchase of volumes of more expensive
natural gasoline acquired in the international markets). In addition
the Company expects to see reduced diluent transportation costs and
efficiency gains resulting from the start-up of the new diluent
blending facility at the Cusiana station in May, which will
significantly reduce diluent trucking distances. With the start-up of
the Cusiana blending station, oil shipped through the ODL pipeline from
the Quifa and Rubiales fields is blended to 16.8 degree API instead of
the 18 degree API blend previously used.
"Transportation costs in the second quarter are expected to be reduced
by approximately 10% compared to the previous quarter through the
increased use of pipeline transportation. The new business
arrangements governing the OCENSA pipeline allowed the Company to
contract additional spare capacity in the pipeline starting in the
second quarter. Further reductions in transportation costs are
expected in the second half of the year with the start-up of the new
Bicentenario pipeline which is expected in the third quarter of the
year and will provide the Company with approximately 37 Mbbl/d of
pipeline capacity and is expected to further reduce crude oil truck
transportation by year-end.
"In the second half of the year, production costs are expected to
decrease significantly as a result of the new Petroelectrica de los
Llanos ("PEL") power transmission line (100% owned by Pacific Rubiales)
which will connect the Rubiales and Quifa SW fields with Colombia's
electrical grid, supplying less expensive energy to power field
operations. During the second quarter, 81% of the 540 transmission
towers were completed. All of the required equipment is in place and
the project is expected to be complete and operational in the third
quarter of 2013.
"Cost reductions on incremental produced barrels from the Rubiales and
Quifa SW fields are expected from the ongoing water irrigation project,
where produced water will be treated through reverse osmosis facilities
and used for agroforestry, rather than re-injected. Water irrigation
will be used to handle most of the increase in water production
expected in the future from these fields. The water irrigation project
is expected to startup in the fourth quarter of 2013.
"A number of important additional infrastructure projects continue to
progress. Of particular note, construction on the new port facility at
Puerto Bahia near Cartagena, Colombia is on schedule with five 300,000
bbl storage tanks currently under construction. The purchase order for
the pipe of the connecting Olecar oil pipeline will be placed in July
and the environmental impact studies will also be submitted this
month. Start-up of this facility is expected in the second half of
2014. The Colombian LNG export project is also on-track for start-up
in late 2014, with the EXMAR LNG barge currently under construction in
Wison Shipyards in China.
"The Company 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
"I am pleased with our strong operating performance in the first half of
2013. I expect our production growth, improving cost structure, and
exciting exploration program to continue in the second half of the
year, as we build for the long-term benefit of our shareholders and
employees, the leading E&P Company focussed in Latin America."
During the second quarter of 2013, the Company continued with its
exploration activities in Colombia, Peru and Brazil, drilling a total
of four wells, two in Colombia, one in Peru and one in Brazil. In
addition, the Company began drilling an exploration well at the La
Creciente Block, located in the Lower Magdalena Valley Basin, in
Colombia, acquired 789 km of 2D seismic in Peru and completed
aeromagnetic and aerogravity surveys in Colombia.
At the Guama Block, located in the Lower Magdalena Valley Basin, the
Company completed drilling operations in the Capure-1X well which is
located some two km northeast of the Pedernalto-1X gas and condensate
discovery. Petrophysical logs indicate a total of 137 feet of net pay
averaging 8% porosity. The well has been completed with a production
string with first testing of the Miocene Porquero Medio D sand expected
shortly and other prospective zones at a later date.
At the La Creciente Block, also in the Lower Magdalena Valley Basin, the
Company started drilling the LCI-1X well, located east of the La
Creciente "A" gas field. The well is expected to reach TD at 12,944
feet and is targeting natural gas. The current depth of the well is
approximately 8,600 feet. Another exploration well (LCH-1X) located
north of the La Creciente "D" gas field is planned to be drilled
immediately following the LCI-1X well.
At the Santa Cruz Block, located in the Catatumbo Basin, the Company
completed the drilling and evaluation of the Phobos-1X exploration
well. Although the well showed the presence of hydrocarbons in the
Mirador and Barco formations, the pressure and fluid tests only showed
hydrocarbon traces, so the well was plugged and abandoned. The Company
is in the process of selling its interest in the Santa Cruz Block.
At the Quifa Block, located in the southern Llanos Basin, the Company
started mobilization of a 721 km2 3D seismic survey to be acquired in the northwestern portion of the
block. This seismic program is expected to identify new exploration and
appraisal locations, confirm commerciality in this part of the block
and also contribute to improving the reservoir model for the developing
Cajua heavy oil field.
At the CPE-6 Block, located approximately 70 km southwest of Quifa, the
processing of the 366 km2 of 3D seismic data acquired in the northern part of the block is
expected to be completed early in the third quarter. The seismic data
is expected to identify appraisal locations to delineate reservoir in
the Hamaca prospect.
At the COR-15 and COR-24 Blocks, in the Cordillera Basin, field
operations of the aero-geophysical (gravity and magnetics) survey were
completed and interpretation of 3D seismic data in the COR-15 and
Muisca Blocks continued with completion expected in the third quarter.
The geophysical surveys in the Muisca Block are expected to validate
two previously identified prospects, which will be evaluated through
two wells expected to be drilled during the fourth quarter of 2013.
In Block 138, located in the Ucayali-Marañon basins, the Company
finished drilling the Yahuish-1X exploration well, reaching a TD of
8,417 feet MD. The well targeted Cretaceous and Paleozoic prospect,
encountering oil shows in one Cretaceous and two Paleozoic sand
intervals. Preparations are being made to production test the
Paleozoic zones through casing.
In Block 135, the Company completed the acquisition of the 789 km of 2D
In Block 116, preparations and licensing continue in anticipation of
drilling the Fortuna-1 exploration well, which is expected to start up
during the fourth quarter of 2013.
At Block Z-1, located in the offshore Tumbes basin, the Company
continues processing the 1,143 km2 of the 3D seismic survey acquired by BPZ Resources Inc., operator of
In the offshore Santos Basin, further evaluation of petrophysical data,
oil samples and drill cores from the Bilby-1 exploration well
continued. Appraisal locations for the Bilby and Kangaroo oil
discoveries are expected to be defined during the third quarter of
During the second quarter, the Company along with its partners was
awarded three blocks in Brazil's 11th Bid Round. All three blocks are
in the offshore deep water in northern Brazil.
At the N-10-96 and O-10-96 Blocks, the civil work for the Balam-1X
exploration well has been delayed by unusual seasonal flooding in the
area. This well is expected to spud by the end of August.
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.
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 news release due
to, among other factors, difficulties or interruptions encountered
during the production of hydrocarbons.
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
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.
Billion cubic feet.
Billion cubic feet of natural gas equivalent.
Barrel of oil.
Barrel of oil per day.
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
represent a value equivalency at the wellhead.
Barrel of oil equivalent per day.
Thousand barrels of oil equivalent.
Million barrels of oil equivalent.
Thousand cubic feet.
West Texas Intermediate Crude Oil.
SOURCE: Pacific Rubiales Energy Corp.
For further information:
Christopher (Chris) LeGallais
Sr. Vice President, Investor Relations
+1 (647) 295-3700
Sr. Manager, Investor Relations
+57 (1) 511-2298
Manager, Investor Relations
+57 (1) 511-2319
Manager, Investor Relations
+1 (416) 362-7735