Pacific Rubiales reports strong financial and operating quarter: EBITDA up 48% to $538 million, net earnings increased to $258 million, net production up 17% to 93,573 boe/d, development and exploration portfolio expanded through acquisition

TORONTO, May 10, 2012 /PRNewswire/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) announced today the release of its unaudited consolidated financial results for the quarter ended March 31, 2012, together with its Management Discussion and Analysis ("MD&A") for the corresponding period. These documents will be posted on the Company's website at www.pacificrubiales.com and on SEDAR at www.sedar.com. All values in this release are in US$ unless otherwise stated. The Company has scheduled a teleconference call for investors and analysts on Thursday May 10^th at 8:00 a.m. (Bogota time) / 9:00 a.m. EDT (Toronto time) / 10:00 a.m. (Rio de Janeiro time), to discuss the Company's first quarter results. Analysts and interested investors are invited to participate using the dial-in instructions available at the end of this news release.

First Quarter 2012 Highlights

• EBITDA was $538 million, up 48% year over year, driven by production growth and higher netbacks.
• Net Earnings were $258 million, compared to a net loss of $70 million a year earlier and $81 million in the fourth quarter.
• Adjusted Net Earnings from Operations were $293 million, up 118% from $134 million in the first quarter of 2011, and an increase over the $172 million reported in the fourth quarter.
• Operating netbacks from production were a record $73.76/boe, an increase of 39% over the first quarter 2011, driven by higher oil prices and higher operating margins.
• Production net of royalties was a total of 93,573 boe/d including 1,703 bbl/d* produced from the recent acquisition in Peru, up 17% over the first quarter of 2011, and an increase from the 90,959 boe/d produced in the fourth quarter.
• Total capital expenditures were $267 million compared to $176 million in the same period in 2011, with 38% ($102 million) invested in infrastructure and 34% ($90 million) in exploration.
• Exploration success of 84% drilling a total of 19 gross exploratory wells of which 16 were successful.
• Additional interest acquired in the Puerto Bahia Port Project to develop strategic oil transport and export infrastructure in Colombia.
• An agreement was signed with Belgium based Exmar NV to advance future liquefied natural gas (LNG) production and export development from Colombia, supported by the Company's large 2P reserves at La Creciente and the recent exploration success on the Guama block.
• An acquisition of a 49% undivided participating interest in the Z-1 block offshore Peru, providing the Company with its first production in Peru and future development and exploration potential.
• An acquisition of a 10% net participating interest in the PPL237 license block and Triceratops structure onshore Papua New Guinea, providing the Company with the potential for significant resource capture.
• In the first quarter of 2012, the Company increased its dividend 18% to $0.11/share, reflecting confidence in the continued strength of the business.

Ronald Pantin, Chief Executive Officer of the Company commented: "The first quarter was very strong from both a financial and operational standpoint, with EBITDA, net earnings and earnings from operations all showing gains, production was up 17% from a year ago, and the Company made a number of strategic moves and investments to strengthen and expand its exploration and development portfolio and provide additional foundation for future growth. Despite widespread permitting delays and transportation disruptions affecting the O&G Industry in Colombia during the first quarter, Pacific Rubiales was able to increase its production 3% from fourth quarter 2011.

In the CPE-6 E&P block, we expect to receive the exploration permit license in the current quarter that will allow us to continue our exploration activities consisting of drilling, well testing and seismic data acquisition through the remainder of the year.

In Colombia the Company agreed to invest equity capital to advance the Puerto Bahia Port Project which when completed in 2014 will provide new oil storage and export capacity infrastructure on the Caribbean coastline, highly strategic to the Company's future growth plans to double its production. In addition, we signed a natural gas Liquefaction, Regasification, Storage and Loading Services Agreement with Belgium based Exmar NV which will lead to the construction of LNG export facilities on the Caribbean coast, strategic to the future development of the Company's large natural gas reserves and resources in northern Colombia.

The Company entered into an agreement with BPZ Resources to acquire a 49% participating interest in the Z-1 exploration and development block, offshore Peru. This will provide the Company with its first oil production in Peru, has significant opportunities to expand production through development and exploration, and complements our existing exploration acreage in the country. We are very excited about the potential of this block and are looking forward to working with our new partner.

In Papua New Guinea, we signed a farm-in agreement to acquire a 10% net interest in the onshore PPL237 prospect license and the Triceratops structure. This is an exciting opportunity for the Company to participate in a low risk, high reward investment with potential to capture large resources on the doorstep of large southeast Asia markets.

In summary, we remain confident in progressing the activity and production guidance set out earlier in the year, all the while strategically positioning the Company for future growth."

Financial Summary

A summary of the financial results for the three months ended March 31, 2012 and 2011 are as follows (a more detailed discussion and analysis can be found in the MD&A):

Operating Crude Oil and Natural Gas Netbacks

The Company produces and sells crude oil and natural gas. It also purchases crude oil from third parties as diluents and for trading purposes, which are included in the reported "daily volume sold". The combined crude oil and natural gas operating production netback during the quarter ended March 31, 2012 was $73.76/boe, 39% higher than the same period in 2011. Most of the increase is due to higher realized oil and gas prices.

Operating netbacks for the quarters ending March 31, 2012 and 2011 are as follows (a more detailed discussion and analysis along with segmented first quarter netbacks can be found in the MD&A):

Production Summary

The Company produces crude oil and natural gas from a number of different fields, 98% of which is located in Colombia. The Company operates most of its production. The average net after royalty production during the quarter ended March 31, 2012 was 93,573 boe/d including 1,703 bbl/d* produced from the recent acquisition in Peru, 17% higher than the same period in 2011.

Average production for the Company's major producing fields for the years ending March 31, 2012 and 2011 are as follows (a more detailed discussion and analysis can be found in the MD&A):

Average Daily Oil Production - Block Z-1 Peru

Production shown in the above table corresponds to the 49% deemed participating share of production attributable to the Company from Block Z-1 for the period January 1 through March 31, 2012, pursuant to a Stock Purchase Agreement ("SPA") signed on April 27, 2012 between the Company and BPZ Resources, Inc. ("BPZ").  Under the SPA (i) at closing operating revenues and expenses will then be allocated to each partner's respective participating interest and (ii) once approvals by the relevant Peruvian authorities are granted, the Company shall receive a 49% interest in the production of hydrocarbons from the Z-1 Block. No revenue and costs have been recognized yet in the Company´s results with respect to the production from Block Z-1 as its full entitlement is subject to approval of the applicable Peruvian authorities.

The Company has scheduled a telephone conference call for investors and analysts on Thursday, May 10, 2012 at 8:00 a.m. (Bogotá time) / 9:00 a.m. EDT (Toronto time) / 10:00 a.m. (Rio de Janeiro time) to discuss the Company's first quarter 2012 results. Participants will include Ronald Pantin, Chief Executive Officer, José Francisco Arata, President, and selected members of senior management.

The live conference call will be conducted in English with simultaneous Spanish translation. The Company will post a presentation on the Company's website prior to the call; it can be accessed at: www.pacificrubiales.com.

Analysts and interested investors are invited to participate using the dial-in numbers as follows:

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 (EDT), May 23, 2012, which can be accessed as follows:

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, Piriri and Quifa oil fields in the Llanos Basin in association with Ecopetrol, S.A., the Colombian national oil company, and 100 percent of Pacific Stratus Energy Corp. which operates the La Creciente natural gas field. 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 working interests in 43 blocks in Colombia, Peru and Guatemala.

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.

Average Daily Oil Production - Block Z-1 Peru

Peru production referenced in the news release corresponds to the 49% deemed participating share of production attributable to the Company from Block Z-1 for the period January 1 through March 31, 2012, pursuant to a Stock Purchase Agreement ("SPA") signed on April 27, 2012 between the Company and BPZ Resources, Inc. ("BPZ").  Under the SPA (i) at closing operating revenues and expenses will then be allocated to each partner's respective participating interest and (ii) once approvals by the relevant Peruvian authorities are granted, the Company shall receive a 49% interest in the production of hydrocarbons from the Z-1 Block. No revenue and costs have been recognized yet in the Company´s results with respect to the production from Block Z-1 as its full entitlement is subject to approval of the applicable Peruvian authorities.

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.

Definitions 

 * See reference to Average Daily Production - Block Z-1 Peru in Advisories

SOURCE Pacific Rubiales Energy Corp.