PACIFIC RUBIALES ANNOUNCES PARTICIPATION IN OLEODUCTO BICENTENARIO DE COLOMBIA
November 15, 2010 at 07:30 AM EST
TORONTO, Nov. 15 /PRNewswire-FirstCall/ - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC) announced today that it has successfully obtained a 32.88% equity interest in Oleoducto Bicentenario de Colombia ("OBC"), the company that will build, own and operate a new oil pipeline in Colombia.
OBC is a special purpose vehicle promoted by Ecopetrol (BVC: ECOPETROL; NYSE: EC; BVL: EC; TSX: ECP), which has a 55.97% interest together with its affiliates, with the participation of other oil producers operating in Colombia, who will control the remaining 11.15% interest. OBC will be responsible for the financing, design, construction and eventual operation of Colombia's newest oil pipeline transportation system, which will run from Araguaney, in the Casanare Department of central Colombia, to the Coveñas Export Terminal in the Caribbean.
The new pipelines will add to the capacity of the existing pipeline systems connecting the Los Llanos Basin to the export markets, which are projected to reach full capacity as the increase in planned production from Colombian producers materializes in the mid-term.
The OBC project is planned to be executed in four phases:
It is expected that the OBC pipeline project will be completed by the end of 2012 or the beginning of 2013. Completion dates are subject to engineering and financing milestones being met, and will be carefully reviewed once the final OBC project team is in place.
For the Company, the participation in this project is a perfect strategic fit, time and volume wise, as it moves towards reaching the goal of having a gross production of 500,000 bbl/d in the mid-term.
It is with this strategy in mind that the Company has committed to participate in Phases 0 and 1, acquiring the right to access approximately 40,000 bbl/day of transportation capacity by the end of 2011.
Under the terms of the participation agreement, the Company has the option to maintain its interest in OBC or have its interest diluted by the time the investment decision is made for Phases 2 and 3. The Company's decision to participate in Phases 2 and 3, which will give it access to an additional 110,000 bbl/d of transport capacity, will hinge on the coming on line of production from the STAR project in Rubiales and the development of the CPE-6 Block.
It is estimated that Phases 0 and 1 will require an aggregate investment of US$1.03 billion, excluding financing costs. The partners intend to finance the OBC pipeline project through project financing, with a debt/equity ratio of 70/30. This financing will be structured to maximize the use of export credit agencies and multilateral financing, as well as to access the Colombian capital markets.
The Company will have representation on the board of OBC and will play an active role in the financing and construction of the project. It is expected that equity contributions by the Company in the initial phases of the OBC will be funded through internally generated cash flow.
Ronald Pantin, Chief Executive Officer of the Company commented: "We are very happy to be able to participate in the OBC pipeline project and be the second largest shareholder. Our participation in OBC, in conjunction with our interest in the ODL pipeline and the transportation capacity secured in the OCENSA pipeline, will cover the transportation needs arising from our aggressive production expansion plan in the mid-term."
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 68,000 barrels of oil equivalent per day, after royalties, with working interests in 40 blocks in Colombia, Peru and Guatemala.
The Company's common shares trade on the Toronto Stock Exchange and La Bolsa de Valores de Colombia under the ticker symbols PRE and PREC, respectively.
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
March 12, 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
SOURCE Pacific Rubiales Energy Corp.