Pacific Rubiales provides fourth quarter 2014 operational update and highlights additional operating cost reductions

TORONTO, March 3, 2015 /CNW/ - Pacific Rubiales Energy Corp. (TSX: PRE) (BVC: PREC) (BOVESPA: PREB) today provided an operational update for its fourth quarter 2014 operating results, which includes estimates of production and sales volumes, price realizations, and operating netbacks, summarized as follows:

Note: All values in this release are in U.S.$, unless otherwise stated.

Fourth Quarter 2014 Results

Total net production for the quarter is expected to be in the range of 143 to 149 Mboe/d, an increase of approximately 9% from the same period a year ago. This is approximately 1% higher than the previous quarter, mainly attributable to increased production from the Company's light and medium oil fields. Heavy oil production from the Rubiales field was lower in the quarter due to continued restricted water disposal capacity, partly offset by higher than expected production at Quifa SW.

The Company reports its sales volumes comprised of produced volumes available for sale, plus purchased diluent volumes (mixed with heavy oil production to form a sales blend), plus oil for trading ("OFT") volumes, plus/minus sales inventory adjustments. Sales volumes can vary significantly from quarter-to-quarter as a consequence of fluctuating diluent and OFT volumes, and significant swings in oil inventories, which are related to the timing of export cargo liftings.

Sales volumes in the fourth quarter are expected to be in the range of 160 to 164 Mboe/d, an increase of approximately 12% from the same period a year ago. The OFT volumes are expected to be in the range of 13 to 15 Mbbl/d (compared to 14.8 Mbbl/d in the third quarter 2014). Diluent volumes are expected to be similar to the prior quarter (2 Mbbl/d in the third quarter 2014).

The Company expects oil price realization in the fourth quarter to be in the range of $66 to $68/bbl, which is lower as compared to the same quarter a year ago and the third quarter 2014, but in-line with the decline in benchmark oil prices. Most of the Company's oil production in Colombia and Peru is exported at prices linked to international oil prices. Both WTI and Brent benchmark oil prices declined approximately 33% - 34% (US$25/bbl) during the quarter. Combined realized prices (including natural gas production) are expected to be in the range of $64 to $66/boe.

The Company calculates its operating netback for both revenues and costs based on total sales volumes excluding OFT volumes, rather than produced volumes. Note that the EBITDA margin on OFT volumes is typically $1 to $3/bbl. Total operating costs are reported as a combination of: production, transportation, and diluent costs, plus other costs and overlift/underlift costs. The latter two (other costs and overlift/underlift) largely relate to movements in storage and cargo lifting inventory and can consequently significantly impact total costs either positively or negatively, in any given quarter.

The decline in global oil prices was partly offset by the cost reductions the Company has been able to achieve during 2014 and expects to continue into 2015.  Compared with the third quarter of 2014 and the same period a year ago, the Company reduced its costs in all three cost categories: production, transportation, and dilution. Operating costs are expected to continue to decrease in 2015 along with a rise in production of light and medium crude oil. Operating netbacks for the quarter are expected to be lower compared with the prior quarter, impacted by the drop in benchmark oil prices, however cash operating margins are expected to remain at or above 55%.

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 also previously acquired 100% of Petrominerales Ltd, which owns light and heavy oil assets in Colombia and oil and gas assets in Peru, and 100% of C&C Energia Ltd., which own 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.

Advisories

Cautionary Note Concerning Forward-Looking Statements

This news 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, Peru, Brazil, Papua New Guinea, Guyana and Mexico; 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 13, 2014 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.

Unaudited Financial Information

Certain financial and operating results included in this news release such as capital expenditures, production information and operating costs are based on unaudited estimated results. These estimated results are subject to change upon completion of the audited financial statements for the year ended December 31, 2014, and changes could be material. Pacific Rubiales anticipates filing its audited financial statements and related management's discussion and analysis for the year ended December 31, 2014 on SEDAR on or before March 31, 2014.

Boe Conversion

Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 5.7 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. The estimated values disclosed in this news release do not represent fair market value. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Definitions

Translation

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.

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