/CO R R E C T I O N from Source — Pacific Rubiales Energy Corp./
In TO454 transmitted yeasterday March 13 at 22:55e, an error occurred in
the first sentence of the second paragraph, “60% after royalties”
should have read “60% before royalties”. Corrected copy follows:
transmitted yeasterday March 13 at 22:55e, an error occurred in the
first sentence of the second paragraph, “60% after royalties” should
have read “60% before royalties”. Corrected copy follows:
Pacific Rubiales Announces Arbitration Decision Regarding High-Price
Provisions in its Quifa Association Contract and Evaluates Next Course
TORONTO, March 13, 2013 /PRNewswire/ – Pacific Rubiales Energy Corp. (TSX: PRE;
BVC: PREC; BOVESPA: PREB) announced today that a commercial arbitration
decision in Colombia has been rendered in connection with its dispute
with Ecopetrol, S.A. (“Ecopetrol”) regarding the interpretation of the
high-prices clause (“PAP”) of its Quifa Association Contract. The Company is evaluating the decision as it leaves open several
unresolved issues. The Company is also evaluating all of its
alternative remedies under Colombian laws and applicable international
The Company’s share of production in the Quifa SW field is 60% before
royalties. This participation may decrease when the application of the
PAP is triggered.
On September 27, 2011, Ecopetrol and the Company agreed on an
arbitration process to settle differences in the interpretation of the
PAP clause in the Quifa Association Contract and its effect on their
share of production.
On March 13, 2013, the arbitration panel delivered its decision
interpreting that the PAP formula should be calculated on 100% of the
production of the Quifa SW field, instead of simply the Company’s 60%.
However, the arbitration panel expressly denied Ecopetrol’s demand for
an order for Pacific Rubiales to deliver the associated volumes of
hydrocarbons as a result of its interpretation of the PAP formula. The
arbitration decision is not yet firm nor does it provide enforceable
remedies against the Company.
In the event that the interpretation of the PAP formula by the
arbitration panel becomes enforceable, the Company would be required to
deliver an additional 1,393,252 bbl of oil to Ecopetrol, representing
Ecopetrol’s additional share in Quifa SW production from April 3, 2011
to December 31, 2012, which in any case would be delivered in kind from
future production out of 10% of its daily net share of production of
the Quifa SW field (as of today, approximately 2,270 bbl/d over a 20
month period). This additional volume has been recorded as an
over-lift on the Company´s consolidated financial statements as at
December 31, 2012.
As a result of the above and under prudent accounting practice, a
provision has been made in the Company´s 2012 year-end financials to
account for cumulative amounts accrued as follows:
-- U.S.$92 million negative impact on 2012 EBITDA, from U.S.$2,110 million to US$2,018 million, representing approximately a 4% reduction. -- U.S.$61 million negative impact on 2012 Net Income, from U.S.$589 million to U.S.$528 million, which is around a 10% reduction.
The Company is evaluating all available courses of action and will
vigorously defend its rights under the Quifa Association contract.
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 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; 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.
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.