TORONTO, Dec. 18, 2013 /CNW/ - Pacific Rubiales Energy Corp. (TSX: PRE) (BVC: PREC) (BOVESPA: PREB) announced today its operational outlook and capital expenditure plans for 2014 and an operational update for 2013. Pacific Rubiales expects to release its year-end 2013 audited results on March 13, 2014. All values in this release are in U.S.$ unless otherwise stated.
2014 OUTLOOK HIGHLIGHTS:
Ronald Pantin, Chief Executive Officer of the Company, commented:
"The Company estimates that it will achieve net production of 128 to 130 Mboe/d in 2013, above the high end of our annual production guidance of 15 to 30% growth (113 to 127 Mboe/d) over 2012 levels, despite accommodating for additional volumes delivered to Ecopetrol, S.A. associated with the PAP arbitration decision at Quifa.
"Our production growth target for 2014 has been set at 15 to 25% above 2013 levels, for net production guidance of approximately 148 to 162 Mboe/d. Production growth will be driven by the Petrominerales acquisition, development of the Hamaca prospect in the CPE-6 Block and other light oilfield developments.
"Our oil price realization in 2014 is expected to average $90 to $95/bbl. Targeted operating costs are expected to be in the range of $30 to $33/boe resulting in an operating netback margin of over 60% and generating EBITDA in the range of $3.4 to $3.6 billion.
"It is important to understand that because of the nature of the Company's business, weighted as it is to heavy oil in Colombia rather than light oil, our production growth tends to materialize in significant step increases. The Company's heavy oil volume growth is expected to continue to be driven by facility construction and commissioning, largely dependent on the pace and timing of environmental permits which the Company has limited control over. On the other hand, heavy oil production has the distinct advantage of providing more sustainable production levels, longer reserve life, and a repeatable and scalable resource to reserve characteristic.
"Our plans for 2014 are shaped by our expanded portfolio and heavy oil focused production that continues to grow and enjoy strong netbacks and robust economics. During 2013, we continued to strengthen our portfolio through the strategic acquisition of Petrominerales: 1) adding additional supplies of high quality light oil which provides a secure lower cost supply of diluent for our heavy oil business, 2) capturing additional components of the value chain through combined asset synergies, 3) securing additional pipeline transportation on the expectation of our rising oil production, and 4) providing additional production, reserves and cash flow at attractive metrics, with the potential for significant exploration upside.
"Our 2014 E&D capital expenditure plan is not just directed to a single year, but instead is focussed on ensuring continued growth and value creation for the future. The Company has identified eight major value drivers that provide significant potential catalysts over the next three to four years:
|1.|| Replacing Production at the Rubiales Field in Advance of Contract Expiry in Mid-2016: The Company now has the visible barrels to develop which it expects to completely replace its current net production of approximately 70 Mbbl/d from the Rubiales Field by the time the primary contract expires in mid-2016. This replacement production will come from the development of its 50% operated interest in the CPE-6 Block and its 100% working interest in the Rio Ariari Block (acquired through the Petrominerales acquisition). In December, two drill rigs were moved onto the CPE-6 Block to commence the exploration and development appraisal program, and one drill rig is expected to be moved onto the Rio Ariari Block by early 2014. Both blocks are located southwest of the Rubiales/Quifa fields, along Colombia's heavy oil resource trend.
|2.|| Negotiating a New Contract for the Rubiales Field: The Company is actively negotiating a new contract for the Rubiales Field that would extend beyond the primary contract, which expires in mid-2016. If achieved, the new contract would encompass production and reserves tied to the implementation of its proprietary STAR secondary recovery technology to the Rubiales Field.
|3.|| STAR Secondary Recovery Technology: Based on recent results, the Company's STAR technology has demonstrated at least a doubling of the primary recovery factor at the Quifa SW pilot project. In 2014, the application of the technology will be extended to commercial scale operation in the Quifa SW Field, by the inclusion of some neighboring well clusters currently producing on primary recovery. STAR is expected to increase reserves and extend reservoir life, which will have the effect of reducing future DD&A costs in the Company's heavy oil fields. The technology is specifically designed for the unique characteristics associated with Colombia's heavy oil fields and is expected to be applicable to the Company's large inventory of heavy oil fields on production, under development and in exploration stages. The Company has been granted two exclusive 20 year patents in Colombia for the application of its STAR technology and believes that it is a potential game-changer for Pacific Rubiales and for the future of oil production in Colombia.
|4.|| Operating Cost Reduction Initiatives: In 2013, the Company initiated cost reduction projects and initiatives focused on reducing its oil operating costs by approximately $8/bbl on a pro-forma basis by the end of 2013, compared to average 2012. These initiatives are expected to be fully implemented by year-end and will be reflected in the Company's operating margins moving into 2014. Diluent costs have already been reduced by over $4/bbl (third quarter 2013 vs. average 2012) and are expected to decrease further. Most of the remaining reductions are expected to come from the start-up of the Petroelectrica ("PEL") power transmission line which will deliver lower cost energy to the producing Rubiales and Quifa fields and power to booster pumping stations on the ODL pipeline beginning in 2014, with further potential to supply lower cost energy to the new developing heavy oil fields in the CPE-6 and Rio Ariari blocks.
|5.|| A large Inventory of Heavy Oil Development and Exploration Blocks: We believe that heavy oil represents the future of Colombian oil and liquids production. Heavy oil has provided over 80% of the country's growth in production since 2007 and now represents close to 50% of Colombia's total oil and liquids production, with the majority of this coming from the Company's operated Quifa and Rubiales fields. Pacific Rubiales has built a large inventory of heavy oil prospects in Colombia, including the Hamaca prospect in the CPE-6 Block, which we expect will commence development in 2014 after receiving the blanket exploration and development permit late this year, a number of prospects on the Rio Ariari Block, which is expected to move from exploration to development by 2015, further identified exploration prospects to drill in both these blocks, exploration underway targeting additional prospects in the CPO-14, CPO-17 and Portofino blocks, and future drilling in the exploration blocks in the Putumayo Basin.
|6.|| A Portfolio of Ongoing "Big-E" Exploration: The Company has built a large inventory of high risk/high-reward exploration prospects in Colombia, Peru, Brazil and Guyana and is committed to allocating upwards of 30% of its capital expenditures each year on exploration to drive future growth. Although much of this is in early stages, this exploration has the potential to provide significant future production volumes beyond a three year time frame. The Company has seen early success with two discoveries this year in the Karoon blocks in the offshore Santos Basin and will be appraising these discoveries in 2014.
|7.|| Active Share Re-Purchase Plan: The Company's management and the board of directors believe that the current share price is under-valued and recently commenced the purchase of its common shares pursuant to the normal course issuer bid instrument put in place in April 2013. The re-purchase plan is expected to be funded by the partial sale of the Company's midstream assets.
|8.|| Access to Large Heavy Oil Resources: The Company has access to very large accumulations of heavy oil in Colombia estimated to exceed seven billion barrels of working interest share of Original Oil in Place ("OOIP"). More than half of these barrels are in the developed producing Rubiales and Quifa fields where primary recovery factors of 14 to 16% have been established and STAR technology holds the potential to at least double the primary recovery factor. The remaining OOIP barrels are in the form of both reserves and prospective resources in the advanced exploration stage CPE-6 and Rio Ariari blocks but exclude additional prospective resources in the Company's other exploration blocks in Colombia.
"In summary, Pacific Rubiales enters 2014 in 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. I am looking forward to an exciting year in 2014 as we continue our strategy of repeatable, profitable growth, building for the long-term benefit of our shareholders, employees and other stakeholders, the leading E&P Company focused in Latin America."
2014 CAPITAL EXPENDITURE HIGHLIGHTS:
In 2013, E&D capital expenditures have been reforecast to total approximately $2 billion, an increase of 15% from original guidance, mainly the result of higher than expected exploration and facility expenditures.
In 2014, estimated E&D capital expenditures are expected to total $2.5 billion, an increase of approximately 25% over estimated 2013 expenditures, mainly reflecting increased development drilling and exploration. The capital expenditure program is expected to be funded by internally generated cash flow and consists of the following major expenditures:
|2014 Development Well Plan(1)|
|Country||Field|| PRE WI
|Number of Wells|
| Light Oil
|Peru|| Corvina /
|(1)||Excludes existing well bore work-overs & side-tracks, and drilling of injector wells|
|(2)|| Development wells on various light oil blocks (including: Cubiro, Cravo Viejo, and Cachicamo)
|2014 Exploration Well Plan Schedule|
|Country||Block||Target*||PRE WI %||Number of Wells||1Q||2Q||3Q||4Q|
|SSJN - 7||NG||50%||1||0.5||1|
|Brazil|| S-M-1101 &
|*Exploration Target: HO (Heavy Oil), NG (Natural Gas), LO (Light Oil)|
|(1)The Company holds a 49.999% participation in Maurel et Prom Colombia B.V. which holds 100% of the Muisca blocks and 50% of the CPO-17 block|
|(2)Excludes up to ten additional provision horizontal exploration pad wells, allowed under the current exploration permit|
|(3)The Company holds a 40% participating interest in the Portofino block owned by Canacol Energy Inc.|
|Note: Excludes potential contingent well in Guyana.|
Colombia will remain the predominant focus of the Company's activities with total E&D capital expenditures in 2014 expected to be in the range of $2.1 billion, including exploration, development drilling and facilities expenditures. Of that amount, $375 million will be directed to the drilling of 41 gross (26.8 net) exploration wells, seismic and other G&G expenditures. Exploration wells of particular interest include the nine wells planned for the CPE-6 Block, the first two wells to be drilled on the CPO-14 Block, and two exploration wells planned for the Rio Ariari Block. Based on the results of these two exploration wells in the Rio Ariari Block, the Company has the permits in place to drill an additional four to five horizontal wells for long term testing, from each exploration pad. The horizontal wells are provisional at the current time but are expected to be used to support the move to full development in 2015.
Development drilling expenditures will account for another $885 million, which will be directed to the drilling of 356 gross (202.3 net) wells: 172 planned for the Rubiales Field, 81 in Quifa SW, 13 in Cajúa, 32 in Sabanero, 16 in CPE-6, and the remaining 42 in the Company's light oil blocks.
Most of the $580 million of total Company planned facility and infrastructure expenditures will be directed to Colombia, approximately in-line with facilities expenditures in 2013. The majority of the expenditures will be directed to the Company's heavy oil producing Rubiales, Quifa, and Cajúa fields including flowlines, power grid distribution, oil dehydration and water treatment facilities required to handle increasing volumes of water production in these fields. Expenditures will also be directed to the first fixed development facilities at CPE-6 and some of the Company's light oil fields. The Company operates the majority of its Colombia blocks and activities.
Capital expenditures in Peru are expected to be in the range of $180 million, with approximately 60% of this directed to exploration activities, including the first exploration wells to be drilled in offshore Block Z-1 since the Company acquired its participating interest in the block, and the drilling of the Fortuna-1X well in onshore Block 116. The remaining expenditure represents development activities in Block Z-1, including the drilling of 10 gross (4.9 net) development wells. The planned wells and capital expenditures on the Z-1 Block are provisional and subject to partner approval.
Capital expenditures in Brazil are expected to be in the range of $80 million, which includes the Company's 35% participating interest in the Kangaroo-2 appraisal well to be drilled up-dip from the Kangaroo-1 oil discovery made in early 2013, and an exploration well on a separate structure at Kangaroo West, both located in the Santos offshore basin. Additional expenditures will be directed to seismic data acquisition in the three offshore exploration blocks in northern Brazil which the Company acquired in the 2013 11th bid round.
Capital expenditures in the range $140 million will be directed to planned exploration activities on the Company's blocks in Guatemala, Belize and Guyana, including: 1) expenditures directed to the drilling of a potential contingent exploration well in offshore Guyana, 2) seismic and geophysical data acquisition in the Company's Belize and Guyana blocks. The Company expects to spinout or sell its Papua New Guinea assets in 2014.
UPDATE ON INFRASTRUCTURE PROJECTS:
The Company continues to invest in both upstream and strategic midstream infrastructure, principally in Colombia, to ensure and control the pace of development of new production. Major activities during the fourth quarter 2013 consisted of:
During the fourth quarter, the Company continued with its exploration activities in Colombia and Guatemala. A total of 13 wells were drilled, 12 in Colombia and one in Guatemala, in addition the acquisition of 251 km of 2D seismic began and the 721 km2 of 3D seismic continued in Colombia.
Colombia - Llanos Basin
Colombia - Lower Magdalena Valley
Colombia - Cordillera Basin
Colombia - Caguan-Putumayo Basin
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 Petrominerales Ltd., which owns light and heavy oil assets in Colombia and oil and gas assets in Peru, 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 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, Peru, Guatemala, Brazil, Papua New Guinea or 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; the impact of environmental, aboriginal or other claims and the delays such claims may cause in the expected development plans of the Company 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 press 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 aggregation.
|Bcf||Billion cubic feet.|
|Bcfe||Billion cubic feet of natural gas equivalent.|
|bbl||Barrel of oil.|
|bbl/d||Barrel of oil per day.|
|boe|| 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 does not
represent a value equivalency at the wellhead.
|boe/d||Barrel of oil equivalent per day.|
|Mboe||Thousand barrels of oil equivalent.|
|MMboe||Million barrels of oil equivalent.|
|Mcf||Thousand cubic feet.|
| Million Tons
| One million tons of LNG (Liquefied Natural Gas) is equivalent to 48 Bcf or 1.36 billion
m3 of natural gas.
|Company working interest production after deduction of royalties.|
| Total Field
| 100% of total field production before accounting for working interest and royalty
|Company working interest production before deduction of royalties.|
|WTI||West Texas Intermediate Crude Oil.|
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.
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
+1 (416) 362-7735