October 18, 2010

TORONTO, Oct. 18 /PRNewswire/ – Pacific Rubiales Energy Corp. (TSX: PRE; BVC:
PREC) announced today that it has executed a Farm-in Agreement  with
Flamingo Energy Investment (BVI) Ltd., Chx Guatemala Limitada, and
Compania Petrolera del Atlantico, S.A., through which the Company will
earn-in a 55% participating interest, as well as operatorship, in the
“7-98″ Contract, which corresponds to the area known as “A-7-96″, made
up of the “N-10-96″ and “O-10-96″ blocks located in the Republic of
Guatemala (the “Contract”). The Company also announced exploration
success at the Pedernalito-1X exploration well in the Guama Block in
northern Colombia.

Ronald Pantin, Chief Executive Officer, commented: “The Guatemalan
farm-in that we announced today reflects our interest in expanding into
countries with high exploration potential that match our technical
skills.  Separately, the exploration success in Guama confirms our
vision of the prospectivity of this block and adds to our growing
presence in the natural gas sector. These new steps mark the beginning
of the road towards becoming the most successful oil and gas company in
Latin America.” 


The Company has identified an area with very attractive exploration
potential in the Republic of Guatemala. This area is the southeast
prolongation of the prolific Carbonate Bank of the Yucatan oil
province, which has borne approximately 70 billion barrels of Mexico’s
original oil in place. In Guatemala, 10 oil fields have been found in
the same Mesozoic reservoirs. The Contract is located in the southern
Peten Basin and is characterized by the presence of abundant oil seeps
and oil occurrences in seismic shot-holes. By signing the Farm-in
Agreement, the Company gains access to five prospects, with a potential
of more than 4 billion barrels of oil in place.

Under the Farm-in Agreement, the Company will earn its participating
interest, as well as operatorship of the Contract, by executing the
following activities (collectively the “Consideration”):

i. reprocessing of 500 km of existing 2D seismic data;
ii. 12,000 km(2) of aero-gravimetry and magnetometry;
iii. geological and geophysical studies;
iv. acquisition, processing and interpretation of 300 km( )of 2D seismic; and
v. the drilling of an exploratory well.

The first four activities described above will have an approximate cost
of US$11,200,000 and the drilling of the exploratory well is expected
to cost US$10,000,000. Under the Farm-in Agreement, if the Company
determines that the drilling of a second exploratory well is required,
the second well would be paid for by the parties according to their
participating interests. If a second well is required, the total amount
potentially to be invested by the Company is estimated to be

In accordance with the law that regulates hydrocarbons exploitation in
Guatemala, the Company will be entitled to act as an oil and gas
operator with a participation in the production, within a transparent
legal framework, which allows it to enjoy legal and contractual
guarantees. This includes: (i) the exclusive right to explore for and
produce oil in specific and well-delineated areas and blocks; (ii) the
right to export and commercialize the oil and gas produced; (iii) the
right to recover all recoverable costs attributable to the Contract;
(iv) the right to import under a special duty-free regime the machinery
and equipment necessary for operations, as well as to re-export it
back;  and (v) the right to reinvest or redirect to foreign countries
the profits obtained from the operations.

The assignment of the working interests is subject to governmental
and/or regulatory approvals, as well as the satisfaction of the
Consideration, among other conditions. Until this occurs, the Company’s
participating interest as well as operatorship will be held in trust by
the other parties.


Pedernalito-1X was drilled in the Guama Block as a new field exploration
well which targeted the thinly laminated sands of the Middle Miocene
Porquero Formation, on the flank of an incipient diapiric feature, with
a 2,355 acre closure. The combined stratigraphic-structural play that
the Company evaluated was based on a series of stacked seismic patterns
with well-developed AVO anomalies.

The well was spudded on September 8, 2010 and reached final depth of
7,100 feet measured depth (MD) on October 8, penetrating the massive
Porquero Formation from surface down to true depth.  During drilling,
the well exhibited several gas shows that forced the Company to
increase the mud weight up to 15.5 ppg. Despite this, the well
gas-kicked twice, at 4,946 feet MD and 6,068 feet MD, flaring gas on
both occasions.

Following open-hole logging, the petrophysical evaluation indicates a
total of 29 feet of net pay in low-resistivity, thinly laminated sands
in eight different zones with average porosity of 11% and average water
saturation of 59%. Also, a 22 foot core was recovered, and laboratory
tests are being conducted in order to study an eventual gas shale
development in the block.

The well will now be cased and a production test will be performed in
one stage on the following intervals:

1       5,980 – 5,990       (10 feet)
2       5,934 – 5,938       (4 feet)
3       5,902 – 5,906       (4 feet)
4       5,868 – 5,872       (4 feet)
5       5,602 – 5,605       (3 feet)

The test will be designed for an estimated static pressure of 3800 psi
at 5,900 feet MD, which takes into consideration the sharp increase of
drilling mud weight from 9.9 ppg to 15.8 in less than 6,000 feet

This new discovery underlines the prospectivity of the area, and adds to
the resource base upon which the Company is building its natural gas
presence. Alternatives for the development of these resources will have
to be evaluated, but will undoubtedly include internal and export
markets, as well as local electricity generation.

The Guama Block is located in northern Colombia and is part of the Lower
Magdalena Basin. The Company holds a 100% working interest in the

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 62,000 barrels of oil
equivalent per day, after royalties, with working interests in 40
blocks in Colombia, Guatemala 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, 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 9, 2010 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.

Source: newswire

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