TORONTO, Nov. 2 /CNW/ - Pacific Rubiales Energy Corp. (TSX: PRE) announced today an expanded capital plan for 2010 that includes a US$853 million capital expenditure program. With this investment program the companies will double its net production, after royalties, from the current estimate for year end 2009 of 46,000 boe per day to 92,000 boe at the end of next year. At Quifa, the company will spend US$162 million for the accelerated development of the block, which includes drilling 20 exploration/appraisal wells and 36 development wells during 2010.
Ronald Pantin, the company's Chief Executive Officer, stated: "Given the stellar performance we have had ramping up production at the Rubiales/Piriri fields to date, the exploration success at the Quifa block, and the successful opening of the ODL pipeline, we believe there is a compelling rationale to accelerate the development of both these fields, with a particular focus on the Quifa block. This will allow us to significantly increase our production, expected to reach 225,000 boe per day of gross production by the end of next year, equivalent to 92,000 boe per day net to the company after royalties. The expanded production targets reinforce our company's strategy to remain as the fastest growing and most dynamic low-cost producer in the region."
Capital Expenditure Program
The US$853 million capital program for 2010 includes US$165.5 million for development drilling, US$190.8 million for exploration, US$471.8 million for production facilities and US$25 million to advance the STAR pilot project. This is an increase of US$471 million over the 2009 capital expenditures and US$394 million over the previously projected 2010 budget.
The company is financing its 2010 capital plan from current operating cash flow and from the early exercise of its warrants which, if exercised in full, would result in net proceeds to the company of approximately US$275 million, after payment of incentive fees.
Highlights of the capital budget:
Development Drilling: US$97 million is allocated to drill 113 producing wells at the Rubiales/Piriri Field (41 vertical, 62 horizontal and 10 injector wells); US$53.2 million is designated to drill 36 producing wells at Quifa (1 vertical and 35 horizontal); and US$15.3 million will go to increase production in the medium-light oil fields to 11,000 bopd by year end.
Exploration: US$94.7 million will go to acquire 6,000 kilometers of seismic work and US$96.1 million to drill 36 exploration/appraisal wells, of which US$43.4 million will be dedicated to drill 20 new wells at Quifa. The 2010 exploration campaign is targeting 405 million boe of mean un-risked resources.
Production Facilities: US$342.3 million will be spent to increase the Rubiales field capacity up to 170,000 bopd; and most importantly, US$65.5 million will go to begin building a new production facility at Quifa that will allow for an initial 30,000 bopd capacity; US$21.5 million is dedicated to upgrade facilities in the medium-light oil and natural gas fields; and US$42.5 million is assigned to the Llanomulsion project, transportation optimization and Information Technology Projects.
STAR: US$25 million has been allocated to develop the secondary recovery pilot project at the Rubiales/Piriri Field as part of the phase III of the STAR project, namely on-site testing at Rubiales.
Year-end production rates: The capital expansion program projects a target operated production rate of 225,000 boepd gross for year-end 2010 (92,000 boepd net), a significant increase from previous projections. Within this target, the company is targeting an increase in production at La Creciente to 80 MMscfd.
With this expanded capital plan the company estimates operating costs to increase to $185 million, a $99 million increase over the 2009 budget.
The announced capital plan of the company and the corresponding new production targets will take the company to a new level of asset development, particularly in the Quifa block. To date the company has announced exploration success on 6 wells in the Quifa block, located in the Llanos Basin of Colombia, namely Prospects "D", "E", "H" and "I". The company is now preparing the necessary documentation to request the declaration of commerciality for the whole south-western Quifa area. The Quifa block is an Association Contract with Ecopetrol, S.A. in which Meta Petroleum (a wholly-owned subsidiary of Pacific Rubiales) holds a 60% working interest and Ecopetrol S.A. holds a 40% working interest.
Management will hold a live conference call to discuss this announcement today, Monday, November 2, 2009 beginning at 10am EST. Analysts and interested investors are invited to participate as follows:
Local Number: 1.416.644.3418
Conference ID: 4180723
The conference call will be available for replay until November 16, 2009.
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 Quifa block 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 43,000 barrels of oil equivalent per day, with working interests in 32 blocks in Colombia and Peru.
Information in this press release expressed in barrels of oil equivalent (boes) is derived by converting natural gas to oil in the ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil. 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 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.
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