Pacific Rubiales Buys Into Block Z-1 Offshore Peru

 Pacific Rubiales Energy Corp. announced today that it has reached an agreement with BPZ Resources, Inc. to enter into a series of transactions ultimately resulting in the acquisition of beneficial ownership of a 49% undivided participating interest in the Z-1 exploration and development block (“Block Z-1”), offshore in Peru.

Under the terms of the agreement, Pacific Rubiales will pay U.S.$150 million in cash and is subject to a commitment of U.S.$185 million for BPZ’s share of capital and exploratory expenditures in Block Z-1. Once the Company has satisfied its commitment to BPZ in connection with the capital and exploratory expenditures, the partners will share costs at their respective ownership interest basis. Completion of the acquisition is subject to approval of the applicable Peruvian authorities.

Ronald Pantin, Chief Executive Officer of the Company, commented: “The acquisition complements our existing exploration acreage in Peru, and it provides us with first production in the country. These are oil weighted assets with excellent running room to expand production, in a country that we see a lot of opportunity. We consider this to be an attractive deal for both companies.”

BPZ currently holds a 100% working interest and is operator under the license relating to the block. BPZ’s acreage in Block Z-1 encompasses an area of approximately 555 thousand gross acres. The block is in the offshore Tumbes basin where oil and gas are trapped in Tertiary aged clastic reservoirs, in water depths ranging from 200 to 1,000 feet. The acquisition includes the developed and producing Corvina and Albacora oil fields, three undeveloped prospects (Piedra Redonda, Barracuda, Delfin), eight additional exploration leads; and existing production facilities, infrastructure and development projects.

Average production on Block Z-1 for the three months ended March 31, 2012 was approximately 3,880 bbl/d oil, all from the Corvina and Albacora fields. All oil is sold in the domestic markets at world referenthece prices. The current (year-end 2011) total proved (“1P”) gross oil reserves on Block Z-1 was estimated by BPZ’s independent reserves evaluators to be 34.7 MMbbl and total proved plus probable (“2P”) gross oil reserves were 93.9 MMbbl.

There is considerable upside to current production expected from Block Z-1. Corvina also includes estimates of 190 Bcf of natural gas reserves, which are non-commercial at the present time. However, plans are being developed for a gas-to-power project to supply an initial 30 MMcf/d to an onshore electrical generating plant over a 20 year period, which Pacific Rubiales will have an opportunity to participate in. Three exploration prospects and eight leads on the block provide additional upside un-risked resource potential estimated at over 2 billion boe (approximately 50% oil), are expected to feed longer term growth. Exploration and development capital spending by the Company is expected to be funded by internally generated cash flow.

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Offshore Energy Today Staff, April 27, 2012