Pacific Rubiales to Acquire 35 Pct Stake in Bilby Exploration Well in Santos Basin, Brazil

Pacific Rubiales Energy Corp. has elected to exercise its option to acquire a 35% interest in Karoon Gas Australia Ltd’s Santos Basin Block, S‐M‐1166. In consideration for acquiring the option interest in S‐M‐1166, Pacific Rubiales will fund the initial US$70 million in well costs along with 35% of costs thereafter relating to the Bilby‐1 exploration well.

Agreement Background

In October 2012, Karoon and Pacific Rubiales executed final agreements for PRE to acquire a 35% interest in the Karoon’s wholly owned Santos Basin exploration blocks, S‐M‐1101, S‐M‐1102, S‐M‐1037, S‐M‐1165 and S‐M‐1166 (“Blocks”).

As part of this agreement, Pacific Rubiales has paid Karoon US$40 million, as consideration for the assignment of the first of the Santos Blocks and carried the first US$70 million in well costs for each of the two wells in the Santos basin exploration program, Kangaroo and Emu/Cassowary. Pacific Rubiales will now carry the first $70 million in well costs at Bilby, for a cumulative total of US$210 million in well carry. After meeting the first US$70 million in individual well costs, Pacific Rubiales will meet 35% of all costs thereafter.

Karoon will remain operator of the blocks during the three well exploration phase and Pacific Rubiales will be entitled to request the operatorship after such time, subject to the completion of its farmin commitments, and compliance of all regulatory and other legal requirements to the satisfaction of the ANP.

The transaction is conditional on obtaining regulatory approval from the Agencia Nacional do Petroleo (“ANP”) of the assignement.

Karoon Gas executive chairman, Robert Hosking, said, ”Pacific Rubiales has proven to be a great partner for Karoon in the Santos Basin drilling program. Our companies have worked well together in our Brazilian partnership, having made the Kangaroo discovery and we look forward to further success in the future.”

Block Background

Karoon’s Santos Basin Blocks are located 112 kilometres off the coast of the Santa Catarina region of Brazil, south of Rio de Janeiro. Karoon’s first Santos Basin exploration well, Kangaroo 1, discovered oil in Eocene aged rocks. This discovery will be appraised with a follow up well to be drilled as soon as a suitable drilling rig can be sourced and mobilised to the Kangaroo‐2 location.

Karoon was awarded 100% participation in the Blocks in the Santos Basin, Brazil during 2008. The five Blocks total 865 square kilometres.

In the shallow water Santos Basin, several recent discoveries have also been made which have similar geological characteristics to Karoon’s Blocks, such as the Sabia, Piracuca, Tiro, Sidon, Guaiama, Panoramix and Vampira discoveries all in the same trend as the previously discovered Merluza, Mexilhao and Caravela fields. These fields have collective resources in the billions of barrel of oil equivalent in‐place.

[mappress]
Press Release, March 28, 2013