Mr. Ronald Pantin reports

PACIFIC RUBIALES REPORTS STRONG FINANCIAL QUARTER: RECORD SALES VOLUMES, EBITDA, AND FUNDS FLOW FROM OPERATIONS, DEVELOPMENT AND EXPLORATION PORTFOLIO EXPANDED AND TRANSFORMED FOR THE FUTURE THROUGH STRATEGIC ACQUISITIONS

Pacific Rubiales Energy Corp. has released its unaudited consolidated financial results for the quarter ended June 30, 2012, together with its management discussion and analysis (MD&A) for the corresponding period. These documents will be available on the company's website and on SEDAR. All values in this release are in United States dollars unless otherwise stated.

The company has scheduled a teleconference call for investors and analysts on Thursday, Aug. 9, 2012, at 8 a.m. (Bogota time)/9 a.m. (Toronto time)/10 a.m. (Rio de Janeiro time) to discuss the company's second quarter results. Analysts and interested investors are invited to participate using the dial-in instructions available at the end of this news release.

Second quarter 2012 highlights

• EBITDA (earnings before interest, taxes, depreciation and amortization) increased to a record $560-million ($1,098-million for the first six months, an increase of 19 per cent compared with the same period in 2011), driven by production growth and higher netbacks.
• Net earnings were $224-million ($483-million for the first six months, an increase of 73 per cent compared with the same period in 2011).
• Adjusted net earnings from operations were $187-million ($480-million for the first six months, an increase of 20 per cent compared with the same period in 2011).
• Operating netbacks from oil and gas production were $63.12 per barrel of oil equivalent (boe), an increase of 2 per cent over the second quarter 2011, despite a 9-per-cent decrease in WTI (West Texas Intermediate) benchmark oil prices.
• Sales volumes increased to a record 117,000 barrels of oil equivalent per day (boe/d) (108,000 boe/d for the first six months, an increase of 13 per cent compared with the same period in 2011).
• Total production net of royalties was 92,611 barrels of oil equivalent per day including 1,740 barrels per day (bbl/d) attributed from the acquisition in Peru (93,092 boe/d for the first six months, an increase of 11 per cent compared with the same period in 2011).
• Total capital expenditures were $316-million compared with $308-million in the same period in 2011, with 38 per cent ($121-million) invested in production facilities, 35 per cent ($111-million) in exploration and 20 per cent ($64-million) in development drilling.
• Exploration success was 82 per cent from drilling a total of 22 gross exploratory wells of which 18 were successful.
• Significant and material acquisitions aligned with the company's long-term growth strategy, including new production in Peru and Colombia, and new exploration acreage and resources in Colombia, offshore Guyana and onshore Papua New Guinea.
• The company received authorization of the environmental licence for increased water injection in the Rubiales oil field which will allow oil production ramp-up in the field.
• The company received an agreement in principle from Ecopetrol for a declaration of commerciality of a portion of the Quifa North oil field which will allow the company to move the field into development and ramp-up production, once it is formally approved by the association's executive committee, the next week.
• Standard and Poor's Rating Services revised its outlook for the company from stable to positive while affirming the company's BB corporate rating and its BB senior unsecured debt rating, providing a strong endorsement of the company's financial and operational strength, and continuing execution on its production and reserve growth targets.
• In the second quarter of 2012, the company paid a cash dividend of 11 cents per share to shareholders of record.

Ronald Pantin, chief executive officer of the company, commented: "The second quarter was very strong from a financial results standpoint, with oil and gas sales revenues and sales volumes, EBITDA, and funds flow from operations at record levels despite year-on-year and sequential 9-per-cent and 10-per-cent, respectively, drop[s] in WTI benchmark oil prices.

"Despite pipeline transportation disruptions affecting the O&G (oil and gas) industry in Colombia during the second quarter, Pacific Rubiales was able to deliver all of its production without any disruptions. This illustrates the strategic importance and value of the pro-active investments the company has made in mid-stream infrastructure.

"Year-to-date production continues to grow but not as rapidly or as much as we anticipated when we first laid out the operating plan and guidance at the beginning of the year. The 2012 guidance we provided in early January this year of 15-to-35-per-cent growth in average net production was based on a realistic expectation around the pace of Colombia's licensing issuance. But licence delays have been much longer than was anticipated and delays have now become an issue affecting all industry producers.

"In the case of Pacific Rubiales it is important to recognize that so far the delay in the licensing has only represented a delay in development, rather than a loss of production. Receiving the Rubiales water injection licence today removes some but not all of the remaining uncertainty around our 2012 production range, allowing us to revise our guidance parameters. At this point we are confident that the company will meet its production guidance range, including production volumes coming from the PetroMagdalena acquisition that closed on July 23, and from its 49-per-cent deemed participating share attributed from block Z-1 in Peru effective from Jan. 1, 2012. The company's net after royalty production including PetroMagdalena and Peru volumes hit a new record this week exceeding 100,000 boe/d.

"I am particularly pleased with the significant strategic steps the company has made thus far this year through a number of asset acquisitions and other strategic investments. This includes our plans to export LNG from northern Colombia, the first such project in Columbia, allowing us to accelerate and unlock value from our large natural gas reserves and resources in the country. In addition, our participation in the building of a new oil export terminal on the Colombia Caribbean coast at Puerto Bahia will ensure export facilities to support an expected doubling of our Colombia oil production in the next five years.

"We have acquired new and growing production in Peru through the 49-per-cent participating interest in block Z-1 and in Colombia through the 100-per-cent acquisition of PetroMagdalena. The latter provides a reliable and growing source of light oil diluent required for our rising heavy oil production in Colombia. Both were acquired on an accretive basis, will add significant reserves and resources, while offering considerable exploration and development upside.

"On the exploration front, we acquired a 40-per-cent participating interest in the onshore Portofino exploration block which lies along the same trend as the giant Rubiales/Quifa and Castilla/Chichemene heavy oil fields, adjacent and on trend to the developing Capella oil field. The Portofino block establishes the company as one of the largest exploration acreage holders as well as the largest producer along the underexplored and underdeveloped heavy oil resource trend in Colombia.

"The company is stepping outside of Colombia with its increased investment in CGX Energy Inc. (currently 35 per cent with an option to increase to 41 per cent and a farm-in on the next two exploration wells) with its very large exploration acreage position in offshore Guyana and the acquisition of a 10-per-cent net participating interest in the PPL-237 exploration block onshore Papua New Guinea containing the large Triceratops natural gas and condensate discovery.

"Both the Guyana and Papua New Guinea exploration acquisitions should be viewed in the context of early-stage large resource capture for the future. We view both as representing world-class hydrocarbon basins with the potential for hosting very large resources. In the case of Papua New Guinea, [a] large natural gas and condensate resource sitting on the doorstep of the world's fastest growing primary energy markets, and, in the case of offshore Guyana, a basin with analogous geology to west Africa and Brazil ... have produced giant oil discoveries. This is a similar strategy that led to the company's successful first mover, large resource capture and rapidly rising production along the heavy oil resource trend in Colombia.

"Each of these acquisitions [has] been funded by cash on hand, while associated exploration and development capital [is] expected to be funded by internally generated cash flow. These acquisitions represent a transformational move for the company and illustrate the company's capacity to look out far beyond the short and medium term, layering in opportunities to support, enhance and develop new growth prospects into the future.

"In this uncertain economic environment, the company's balance sheet remains strong; our growth targets in the medium term remain intact underpinned by our extensive low-cost heavy oil exploration and development assets in Colombia. We will continue our strategy of repeatable and profitable growth by building for the long-term future, the leading E&P company focused in Latin America."

Financial summary

A summary of the financial results for the three months and six months ended June 30, 2012, and 2011 is shown in the associated table (a more detailed discussion and analysis can be found in the MD&A).

                                       FINANCIAL SUMMARY
              (In thousands of United States dollars except per share amounts or as noted)

                                                                Three months ended         Six months ended    
                                                                          June 30,                 June 30,         
                                                                    2012      2011         2012        2011

Oil and gas sales                                             $1,035,854  $957,509   $1,967,704  $1,541,058
EBITDA                                                           559,795   558,339    1,097,986     920,866
EBITDA margin (EBITDA/revenues)                                      54%       58%          56%         60%
Per share
Basic ($)                                                           1.90      2.08         3.74        3.43
Diluted ($)                                                         1.84      1.87         3.62        3.08
Net earnings                                                     224,344   349,375      482,689     279,782
Per share  
Basic ($)                                                           0.76      1.30         1.64        1.04
Diluted ($)                                                         0.74      1.20         1.59        1.00
Cash flow from operations                                        131,906   116,273      708,005     436,076
Per share  
Basic ($)                                                           0.45      0.43         2.42        1.63
Diluted ($)                                                         0.43      0.39         2.33        1.46
Adjusted net earnings from operations                            187,108   266,707      479,876     400,928
Per share  
Basic ($)                                                           0.64      0.99         1.64        1.49
Diluted ($)                                                         0.62      0.89         1.58        1.34
Non-operating items (loss)                                       (37,236)  (82,668)      (2,813)    121,146
Funds flow from operations                                       415,223   400,202      807,687     666,909
Per share 
Basic ($)                                                           1.41      1.49         2.75        2.49
Diluted ($)                                                         1.37      1.34         2.66        2.23

Operating crude oil and natural gas netbacks

The company produces and sells crude oil and natural gas. It also purchases crude oil from third parties as diluents and for trading purposes, which are included in the reported daily volume sold. The combined crude oil and natural gas operating production netback during the quarter ended June 30, 2012, was $63.12 per boe, 2 per cent higher than the same period in 2011 despite a 9-per-cent decrease in WTI benchmark oil prices, driven primarily by reduced total operating costs and higher sales price differentials.

Production summary

The company produces crude oil and natural gas from a number of different fields, 98 per cent of which are located in Colombia. The company operates most of its production. The average net after royalty production during the quarter ended June 30, 2012, was 92,611 boe/d including 1,740 bbl/d attributed to the recent acquisition in Peru, 3 per cent higher than the same period in 2011.

Second quarter conference call details

The company has scheduled a teleconference call for investors and analysts on Thursday, Aug. 9, 2012, at 8 a.m. (Bogota time)/9 a.m. (Toronto time)/10 a.m. (Rio de Janeiro time) to discuss the company's second quarter results. Analysts and interested investors are invited to participate using the dial-in numbers as follows (a presentation will be posted on the company's website prior to the call).

Participant number (international/local):  647-427-7450

Participant number (toll-free Colombia):  01-800-518-0661

Participant number (toll-free North America):  888-231-8191

Conference ID (English participants):  13207829

Conference ID (Spanish participants):  13257784

A replay of the call will be available until 11:59 p.m. (Toronto time) on Aug. 23, 2012, which can be accessed as follows:

Encore toll-free dial-in number:  1-855-859-2056

Local dial-in number:  416-849-0833

Encore ID (English participants):  13207829

Encore ID (Spanish participants):  13257784

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