Pacific Rubiales Announces Financial Results for the Quarter Ended March 31,

TORONTO, May 13 /CNW/ - Pacific Rubiales Energy Corp. (TSX: PRE), announced today the release of its unaudited consolidated financial results for the three month period ended March 31, 2010, together with its Management's Discussion and Analysis. These documents are posted on the company's website and SEDAR:

Ronald Pantin, Chief Executive Officer, commented: "We are very pleased with first quarter results which continue to show strong production growth, with an increase of 81% in average realized oil and gas sales price reflected in a 246% increase in revenues from the same quarter last year. The company also almost doubled average production of oil and gas sold, going from 34,283 boed to 65,702. Gross operated production increased by 88% from the same period last year, demonstrating the rapid ramp-up in production at Rubiales from the capacity investment we have made in our principal field."

Management will hold a live conference call in both English and Spanish on Friday, May 14 to discuss the company's financial results.

The conference call will be held in English beginning at 9:00 am Bogota time or 10 am EST. Analysts and interested investors are invited to participate as follows:

    Participant Number (Local/International): 1 (647) 427-7450
    Participant Number (Toll Free US/Canada): 1 (888) 231-8191

Conference ID: 75244675

The conference call will be held in Spanish beginning at 10:30 am Bogota time or 11:30 am EST. Analysts and interested investors are invited to participate as follows:

    Participant Number (US/ Canada) (877) 407 5372
    Participant Number (International): 1 (702) 894 2278
    Participant Number (Toll Free Colombia): 01800 710 1835

    Conference ID: 75545230

    Operating Summary
                                              Three months ended March 31,
                                         2010      2010      2010      2009
                                          Oil       Gas    Combined  Combined

    Average daily production sold
     (boe/day)                          55,734     9,968    65,702    34,283

    Operating netback ($/boe)(1)

      Crude oil and natural
       gas sales price                   70.50     29.99     64.35     35.65
      Cost of Production(2)               4.10      1.76      3.74      3.75
      Transportation                      7.68      0.47      6.59      6.76
      Upgrading cost (diluent
       including transportation)         15.15         -     12.85      5.91
      Other costs(3)                     (0.42)     1.44     (0.14)    (0.93)
      Overlift/Underlift(4)              (0.97)        -     (0.82)    (0.21)
      Operating netback                  44.96     26.32     42.13     20.37

    (1) Combined operating netback data based on weighted average daily
        production sold which include diluents necessary for the upgrading of
        the Rubiales blend.
    (2) Cost of production mainly includes lifting costs and other production
        costs such as personnel, energy, security, insurance and others.
    (3) Other costs mainly correspond to royalties on gas production,
        external road maintenance at Rubiales field, inventory fluctuation,
        and the net effect of the currency hedges of operating expenses
        incurred in COP during the period.
    (4) Corresponds to the net effect of the overlift position for the period
        amounting to $4.9 million, which generated a reduction in the
        combined production costs of $0.82 per boe.

    Financial Summary

    (in thousands of US$ except                               2010      2009
     per share amounts or as noted)                             Q1        Q1

    Average production of oil and gas sold (boe/d)          65,702    34,283

    Average combined crude oil and
     natural gas sales price ($/boe)                         64.35     35.65
    Combined operating netback ($/boe)                       42.14     20.37

    Net sales                                              380,523   110,000
    Income from Operations(1)                              159,954     5,849

    Funds Flow from Operations(2)                          150,727    31,548
    Per share - basic ($)                                     0.63      0.15
              - diluted ($)                                   0.60      0.15

    EBITDA(3)                                              229,655    49,797
    Per share - basic ($)                                     0.96      0.24
              - diluted ($)                                   0.91      0.24

    Net lncome(4)                                           32,125    52,636
    Per share(5) - basic ($)                                  0.13      0.25
                 - diluted ($)                                0.13      0.25

    (1) Income from operations includes revenues less operating costs,
        depletion, depreciation & amortization and G&A expenses, and excludes
        effect of the overlift, stock-based compensation and other income and
    (2) Calculated based on cash flow from operations before changes in non-
        cash operating working capital.
    (3) See Non-GAAP Financial Measures in the company's full management and
        Discussion Analysis.
    (4) Net income for the period of $32.1 million includes a series of non-
        operating expenses totaling $78.5 million (March 31, 2009 - gain of
        $50.5 million), mainly corresponding to:
           a) Non-cash items of $62.7 million (same period of 2009 - gain of
              $67.0 million), due to unrealized exchange losses resulting
              from the strengthening of the Canadian dollar and Colombian
              peso against the US dollar, and unrealized loss on risk
              management contracts outstanding as of the end of March 2010,
              which may or may not materialize in future periods and stock-
              based compensation costs. During the first quarter of 2010, the
              company entered into foreign exchange hedging contracts to
              reduce its foreign currency exposure associated with operating
              expenses incurred in Colombian Pesos.
           b) Non-operating expenses of $15.8 million (same period of 2009 -
              $16.5 million) consisting of interest primarily due to
              financial costs associated with financing facilities for the
              development of the oil infrastructure to increase the
              production capacity of the Rubiales field and other costs.
    (5) The basic weighted average number of common shares outstanding for
        the first quarter of 2010 and 2009 was 240,126,671 (diluted -
        251,582,984) and 210,600,249 (diluted - 211,543,738), respectively.

First Quarter 2010 Results Summary

The results for the first quarter of 2010 underline the strength of the company's operational activity, its capacity to increase production and commitment from management to deliver robust financials. Management is focused on realizing challenging operational objectives while continuing the company's ambitious exploration and production ("E&P") investment program. The average WTI price for the period was $78.45 per barrel (bbl) in comparison with $44.53/bbl for the three months ended March 31, 2009, which represents an increase of 76%. As a result, the average combined realized oil and gas sales price for the company for the first quarter of 2010 increased to $64.35 per barrel of oil equivalent (boe) from $35.65 per boe in the same period of 2009, representing an increase of 81%. This last figure demonstrates how the company was able to execute above the norm through its trading and commercial initiatives.

The increase in gross operated production of the company during the first quarter of 2010 was a significant achievement, averaging 129,686 boe per day (boe/d), which is 60,496 boe/d (88%) greater than operated production for the same period of 2009. This growth in operated production came mainly through the increase in production at the Rubiales heavy oil field. As of April 30, 2010, the company's total operated production exceeded 136,000 boe/d for all its fields, which makes the company the fastest growing oil and gas company in Colombia.

In the execution of its commercial strategy, the company continued exporting its oil production to international markets mainly to the USA, China, and Europe, while maintaining a presence in the local market with direct sales to the bunker and industrial sectors. During the first quarter of 2010, the company exported 4.5 million bbl of crude oil, and sold 0.4 million bbl to the Colombian domestic market.

The company significantly increased revenues by 246% to $380.5 million as compared to $110 million in the same period of 2009. This was the result of the considerable increase in production and the optimization of marketing activities, coupled with higher combined crude oil and gas sale prices, as mentioned above. This operational success resulted in increased revenues and increased net income for the period to $32.1 million.

The Oleoducto de los Llanos Orientales ("ODL") pipeline was fully commissioned in this quarter and this project is now a reality that will allow the development of the Rubiales field to its full potential, as well as the leveraging of Quifa and the company's surrounding exploration blocks. Also, in a strategic move due to projected full capacity projected for Colombian pipelines, the company bought firm pipeline capacity in the Ocensa system for 50,000 bbl/d in 2010 and 60,000 bbl/d from 2011 until 2016, which ensures that the company will not experience pipeline transport limitations in the future.

During the first quarter of 2010, the company focused its exploration and appraisal campaign on the Quifa, Rubiales and Moriche blocks, drilling a total of 10 wells at those locations (two exploratory, three stratigraphic and five appraisal wells). The results of one exploratory and two stratigraphic wells, drilled in the northern part of Quifa Block, confirmed the presence of hydrocarbons in prospects "A", "F" and "Q", incorporating a total of 251 mmbbl of certified gross resources for these prospects, and the four appraisal wells, drilled in the southwest of Quifa, confirmed the extension of prospects "H" and "E" to the northeast. At the Rubiales field, one successful appraisal well extended the area of the Rub-147 (prospect "D") to the northeast. In the Moriche Block, one successful exploratory well incorporated a total of 1.22 million bbl of combined proved plus probable (2P) gross reserves, or 0.46 million bbl net reserves before royalties. The total net reserves after royalties reached 0.43 million bbl.


    -   On April 26, 2010 the company announced the final results of the
        first phase of its exploration campaign from late 2007 through to
        April 2010, on its Quifa and Rubiales Blocks. These results have led
        to a declaration of commerciality for the Quifa southwest area and
        the Rubiales southwest area, an important event for the company as it
        has focused significant effort and capital to bring these areas into
        production. The closing of this first phase is a key milestone in the
        company's strategy to continuously grow our resources, prove new
        reserves and rapidly bring new areas into our existing production
        infrastructure. The success of the exploration campaign within Quifa
        in particular, leading to over 40,000 ha of declared commerciality,
        is also very significant since it demonstrates the long term
        viability of the Rubiales region and the Llanos Basin.

    -   On April 7, 2010, the company announced the successful completion of
        the first phase of the Synchronized Thermal Additional Recovery
        (STAR) project, and the kick-off of the second phase, as contemplated
        by the Memorandum of Understanding (MOU) executed with Ecopetrol on
        April 6, 2009. During the first phase of the STAR project a number of
        studies and tests were carried out at the University of Calgary's
        research laboratories, and on the basis of the same, it has been
        determined that the Rubiales crude has a stable and controllable
        ignition point at reservoir conditions, that the fire front thereby
        generated is stable, and that there is evidence of significant
        additional recovery potential by using the STAR process at the
        Rubiales field. These results confirm the feasibility and potential
        of the technology and clear the way for the next stages of the

    -   On March 16, 2010, the company announced a new oil discovery at the
        Quifa-24X exploratory well, as well as results of the Quifa-32
        appraisal well located in the Quifa Block. The sustained effort and
        focus in this area continues to show positive results and extends the
        company's understanding of the Quifa region and its hydrocarbon

    -   On February 24, 2010, the company announced an update to the
        independently certified Statement of Reserves Data and Other Oil and
        Gas Information for all of the company's assets, estimating total 2P
        reserves at 280.6 million boe (MMboe), net after royalties, having a
        total net present value (NPV) (10% discount, before tax) of
        $8.32 billion. Despite a total net production of 12.4 MMboe in 2009,
        the company's net proven plus probable reserves increased by 34.3%,
        from 209 MMboe as of December 31, 2008. These reserves represent
        1.3 bbl of net 2P reserves per outstanding share as of December 31,

    -   During the first quarter of 2010, the company exported a total of
        4.5 million bbl of oil mainly to US and China refineries, including
        eight Castilla crude oil cargoes for 4 million bbl, and one Vasconia
        crude oil cargo for 0.5 million bbl at an average price of
        $70.37/bbl, which is a significant commercial accomplishment
        typifying the quality of our production. The company also maintained
        its flexible commercial strategy by selling 0.4 million bbl of
        Rubiales production in the Colombian domestic market, at an average
        price of $68.26/bbl.

    -   During the first quarter of 2010 the sales of gas increased,
        achieving an average of 59.7 mmscf/d of natural gas sold from the La
        Creciente field at an average price of $4.95/mscf, representing a
        premium of 41% over the weighted domestic regulated price
        ($3.51/mscf) and only 7% lower than the Henry Hub natural gas prices
        in the United States Gulf Coast.

    -   During the first quarter of 2010, exploration activity mainly
        concentrated on drilling campaigns at the Quifa, Rubiales and Moriche
        blocks for a total of 10 wells drilled in these three areas. As a
        result of this activity, a total of two exploratory, three
        stratigraphic and five appraisal wells were drilled. The total gross
        exploration expenditure in the drilling campaign was $25.48 million.
        As a result of the drilling campaign, the company incorporated a
        total of 1.43 million bbl gross of oil reserves, and 251 million bbl
        of certified gross resources. The total net exploration expenditure
        was $13.42 million. The company incorporated a total of
        0.43 million bbl oil net reserves before royalties.

    -   On March 2, 2010, a capacity test of the ODL pipeline was performed
        reaching a total of 167,642 bbl during 24 hours of continuous
        pumping. Over 16 million bbl of diluted crude have been transported
        from Rubiales to Monterrey since the pipeline entered in operation in
        October 2009.

    -   During the first quarter of 2010 the company transported 55,934 bbl/d
        through the different trucking and pipeline systems, 39,043 bbl/d of
        Rubiales crude (12.5degrees API), and 16,891 bbl/d of diluents and
        other crudes produced, and 92% of this volume was transported via the
        pipeline systems. During this quarter, the company transported
        through the ODL pipeline a combined volume of 3.64 million bbl of
        heavy oil and diluents, generating savings in transportation costs
        for the company of approximately $8 per bbl, or 45% lower in
        comparison to the truck transportation cost.

    -   Due to higher realized crude oil prices and a substantial increase in
        production volume during the first quarter of 2010, the company was
        able to significantly increase revenues by 246% in comparison to the
        prior period ($380.5 million during the first quarter of 2010 versus
        $110 million during the same period of 2009), mainly due to a
        substantial increase in production volume and trading optimisation.

    -   As of April 30, 2010, the company had reached the historical
        milestone of exceeding 136,000 boe/d of gross operated production,
        equivalent to 55,123 boe/d net after royalties. The 136,000 boe/d
        milestone resulted from the continuous growth in production of heavy
        oil in the Rubiales/Piriri blocks, further supported by the coming
        into operation of the ODL pipeline. This volume also incorporates the
        development of the company's light and medium oil blocks, as well as
        the natural gas volume produced (at a conversion rate of 6,000
        standard cubic feet per barrel) from the La Creciente block and other
        smaller fields.

    -   EBITDA during the first quarter of 2010 totalled $229.7 million,
        which represents a significant increase of 361% compared to the first
        quarter of 2009 EBITDA of $49.8 million. EBITDA from international
        sales represented 82% of this amount, while EBITDA from gas and
        domestic sales contributed 10% and 8%, respectively.

    -   The company entered into currency risk management contracts in the
        form of costless collars to reduce the foreign currency exposure
        associated with operating expenses, as well as general and
        administrative expenses, incurred in Colombian Pesos. During the
        first quarter of 2010, the company had currency risk management
        contracts outstanding totalling $319 million with expiration dates
        between April and December 2010.

    -   Total capital expenditures during the period totalled $81.0 million
        ($72.3 million net of the 30% tax benefit effect in Colombia), of
        which $13.42 million went into exploration activities including
        seismic, aerogravimetry, aeromagnetometry and drilling ($1.42 million
        to geophysics and $12.0 million to drilling of wells). Also,
        $36.66 million were invested in the expansion and construction of
        production infrastructure and $30.92 million in production drilling

    -   The company announced on November 4, 2009 an expanded and fully
        funded capital plan of $853 million for 2010. With this investment
        program the company expects to double its net production to reach
        92,000 boe/d before royalties at the end of 2010 versus the 2009 year
        end figure of 40,579 boe/d. The $853 million capital program for 2010
        includes $165.5 million for development drilling, $190.8 million for
        exploration, $471.8 million for production facilities and $25 million
        to advance the STAR pilot project. This is an increase of
        $471 million over 2009 capital expenditures. As of March 31, 2010, a
        total of $81.0 million of capital investments had been made.

    -   On April 17, 2010 the company closed the syndication of a
        $250 million unsecured revolving credit facility. Pricing of the
        facility varies in accordance with the rating assigned to the
        company's senior debt securities by Standard & Poor's Ratings Group
        and Fitch Inc. The company will pay commitment fees on the unutilized
        portion of any outstanding commitments under the facility and regular
        spread over any disbursed amounts. Based on the company's current
        rating and expected usage, the commitment fee will be 100 basis
        points and the applicable margin will be LIBOR plus 325 basis points.
        Subject to customary acceleration events set out in the credit
        agreement, or unless terminated earlier by the company without
        penalty, repayment of the outstanding principal on the facility will
        be made in full on the second anniversary of the closing date.

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 at 56,700 barrels of oil equivalent per day, with working interests in 32 blocks in Colombia and Peru.

Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 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 April 1, 2009 filed on SEDAR at 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.

For further information: For further information: Mr. Ronald Pantin, Chief Executive Officer and Director; Mr. Jose Francisco Arata, President and Director, (416) 362-7735; Ms. Belinda Labatte, (647) 428-7035

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