acquisition of petrominerales by pacific rubiales

7/27/2019 Acquisition of Petrominerales by Pacific Rubiales

1/20

Production Growth and Cash Generation Focus


2/20

2

Forward Looking Statements

Cautionary Note Concerning Forward-Looking Statements

This presentation contains forward-looking statements. All statements, other than statements of historical fact, that address activities, events or

developments that Pacific Rubiales Energy Corp. (the "CompanyorPRE) 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 actualcircumstances 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, Peru, Guatemala, Brazil, Papua New Guinea or Guyana;

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, 2013 filed on SEDAR atwww.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.

Statements related to resources are deemed forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions,

that the resources will be discovered (in the case of Prospective Resources) and can be profitably produced in the future. Specifically, forward-looking

information contained herein regarding "resources" may include: estimated volumes and value of the Company's oil and gas resources; estimated volumes of

Contingent and Prospective Resources and the ability to finance future development; and, the conversion of a portion of Contingent Resources into reserves

and Prospective Resources into Contingent Resources.

Operational Plans are subject to obtaining local permits, other customary regulatory approvals and approvals from our joint venture partners.
http://www.sedar.com/http://www.sedar.com/http://www.sedar.com/http://www.sedar.com/http://www.sedar.com/http://www.sedar.com/


3/20

3

Transaction

This acquisition adds production and reserves at attractive and accretive

metrics; assets whose value can be increased through accelerated activity,

transportation and marketing synergies, and exploration upside. This notonly strengthens our focus in Colombia and Peru, but also builds on our

proven track record of extracting value by growing production and

generating cashflowRonald Pantin, CEO, Pacific Rubiales

Offer to PMG Shareholders: Cdn.$935 million cash ($11.00/common share), plus one commonshare of ExploreCo

PRE assumes total net debt (estimated at Cdn.$640 million), including convertible bonds

ExploreCo retains PMGs Brazil exploration assets and Cdn.$100 million

Estimated total purchase price (fully diluted basis): Cdn.$1.6 billion

PRE secures short-term debt financing of up to U.S.$1.3 billion expects to refinance afteracquisition is completed


4/20

ASSETS

4


5/20

PMG Assets Dovetail with Existing PRE Assets

PMG production and exploration blocks providean excellent bolt-on acquisition, complimentaryto PREs blocks

1H2013 production: 22 Mbbl/d gross (19Mbbl/d net)

2012 year-end 2P reserves: 41 MMbbl gross (37MMbbl net), 65% Total Proved

9.8 million gross (6.8 net) acres acquired

Colombia

PRE: 56 production and exploration blocks

PMG: 18 production & exploration blocks(concentrated in Llanos basin): 1.6 million

gross/net acresPeru

PRE: 5 production & exploration blocks

PMG: 4 exploration blocks (Ucayali Maraonbasin): 8.2 million gross (5.2 net) acres

5

PMG Acquisition Blocks

PRE Existing Blocks


6/20

PMG Colombia Assets

Production and Exploration Blocks

Most of production and exploration blocksare in prolific Llanos basin

Includes deep and medium depthproducing fields and exploration prospectsand leads

Large exploration resource providessignificant running room to drive futuregrowth

Well established and operating productionfacilities

Rio Ariari heavy oil block potentialexpected to benefit from PRE expertiseand technology

Two blocks in Putumayo basin provideproduction volumes and explorationupside in high potential basin

6


7/20

PMG Peru Assets

Exploration Blocks

Four blocks add to PREs growing onshorePeru exploration hopper

Block 126 discovery of oil at Sheshea flowtested 1,430 bbl/d 53 degree API gravity oil

Seeking regulatory approval for 3D seismic,long-term production testing, appraisaldrilling and early commercial development atSheshea

Block 131 (30% WI) partner drilling LosAngeles-1X exploration well in 2H2013

Block 114 (30% WI) partner to drill RioCaco Sur-1x exploration well in 2014

All targeting high impact prospects

7


8/20

Colombia Assets

Infrastructure

Highly strategic oil pipeline assets providelower cost advantage over trucking forPREs growing Llanos basin production

5% equity interest in OCENSA pipeline,provides net U.S.$30 million per annum

dividend income and spare capacity

9.65% equity interest in OBC pipeline addsto PREs 33.4% existing interest, providingapproximately 50 Mbbl/d capacity whenon-line in 4Q2013

Current process underway to monetize

pipeline assets, retaining transportationrights

PREs extensive infrastructure providescompetitive advantages

8


9/20

Production Synergies

PMG Total production 22 Mbbl/d gross (19Mbbl/d net) in 1H2013

75% (approximately 15 Mbbl/d) of PMGlight oil production in Llanos basin isideally suited for use as diluent supply for

upgrading heavy oil

Mostly 100% WI and operated, providesoperational advantages and significantsynergies

In close proximity to PREs heavy oilproduction and facilities in Llanos basin

Integration with PREs heavy oilproduction captures significantcomponents of value chain

9

Orito

Heavy Oil

CentralLlanos

Deep Llanos

Neiva


10/20

Exploration Work Commitments

Limited exploration work commitments required in near-term on PMG exploration blocks

Options to accelerate exploration as required

Access to additional large exploration resources in Colombia and Peru

10

Exploration Work Commitments ($MM)

2013 2014 2015

Colombia - 61 24

Peru 11 - 19

Total 11 61 43


11/20

TRANSACTION VALUE COMPONENTS

11


12/20

Pro-forma Expectation*

12

Attractive acquisition metrics for high

quality / high netback light oil

Management anticipates increased

2013 reserves and 2H2013 production

Estimate 2014 Pro-forma EBITDA

U.S.$4 billion

PRE PMG PRE+PMGMetrics of

Acquisition

Blocks

Colombia 56 15 71

Peru 5 4 9

Production Boe/d

Net (June 2013)Total 129 19 148 $47K/bbl/d

2012 Year-end Net

Reserves

1P (MMboe) 336 24 360

2P (MMboe) 514 37 551 $25/bbl

Est. Pro-forma 2012 EBITDA (U.S. $Billion)

PRE 3.4

PMG 0.5

Synergies 0.1

Total 4.0

* Management estimate


13/20

Transaction Value Components*

13

Total acquisition costs includes Midstream (pipelines and facilities) as well as Upstream(production and reserves)

Significant value achieved through synergy savings on combined operations (operational

optimizations: transportation, diluent supply, G&A) estimated at $160 MM/annum

After deducting value of non-reserve assets, acquisition implies attractive deal metrics ofapprox. $47K/bbl/d net production and $25/bbl 2P net reserves

Production and reserves are predominantly high quality light oil with high netbacks

Estimated Value

(Cdn. $ Billions)

Acquisition Cost (share purchase + debt assumption) $1.6

Less value of oil pipeline interests $0.4

Less operational synergy savings $0.3

Value attributed to production & reserves $0.9

* Management and external advisors estimates


14/20

STRATEGIC & BUSINESS DRIVERS

14


15/20

Significant Synergies Add Value*

15

Adds 15 Mbbl/d light and medium crudes for diluent, substitutes 3 Mbbl/d gasoline

OCENSA pipeline capacity will allow transportation of 8.3 Mbbl/d heavy oil currentlytransported by truck to Barranquilla at higher cost

Added downloading capacity at Bicentenario, Araguaney, Cusiana, and Monterey provideoperational optimizations and cost savings

Reduction in G&A

Annual (U.S.$MM)

Natural gasoline diluent savings (3 Mbbl/d * $31.2/bbl) $35

Heavy crude oil displacement from Barranquilla to OCENSA

(8.3 Mbbl/d * $22.6/bbl)$69

Other crude displacement (10.3 Mbbl/d * $8.4/bbl) $32

G&A savings $24

Total Value of Synergies $160

* Management estimates


16/20

Acquisition Summary:

One plus One = Three

Attractive and highly accretive acquisition metrics

Acquired assets all located in Colombia and Peru attractive jurisdictions we are familiar withand aligned with our core capabilities and expertise

Majority of production from operated high working interest properties in Llanos basinColombia, in close proximity to PREs infrastructure

Light oil production provides lower cost supply of diluent for Companys growing heavy oil

production

Significant value from synergies derived from operational optimizations

Provides strategic access to reliable transportation infrastructure acquired from equityinterests in OCENSA and OBC oil pipelines

Upside potential to unlock additional value from substantial exploration acreage and large

resource base

Acquisition accomplished by short-term debt financing, with plan and capability in place toreduce debt targeting 2014 Debt/EBITDA ratio below 1x

Targeting Pro-forma 2014 EBITDA of U.S.$4 billion on combined operations

16

Combined PRE & PMG: One plus One = Three


17/20

Q&A

17


18/20


19/20

19


Resources

Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each

class. Estimates of remaining recoverable resources (unrisked) include Prospective Resources that have not been adjusted for risk based on the chance of

discovery or the chance of development and Contingent Resources that have not been adjusted for risk based on the chance of development. It is not an

estimate of volumes that may be recovered. Actual recovery is likely to be less and may be substantially less or zero.

Prospective Resources are those quantities of oil and gas estimated to be potentially recoverable from undiscovered accumulations. There is no certainty that

the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective

Resources. Application of any geological and economic chance factor does not equate Prospective resources to Contingent Resources or reserves. In addition,

the following mutually exclusive Classification of Resources were used:

Low Estimate - This is considered to be a conservative estimate of the quantity that will actually be recovered from the accumulation. This term reflects a P90confidence level where there is a 90% chance that a successful discovery will be equal to more than this resources estimate.

Best Estimate - This is considered to be the best estimate of the quantity that will actually be recovered from the accumulation. This term is a measure of

central tendency of the uncertainty distribution and in this case reflects a 50% confidence level where there is a 50% chance that the successful discovery will

be equal to or more than this resources estimate.

High Estimate - This is considered to be an optimistic estimate of the quantity that will actually be recovered from the accumulation. This term reflects a P10

confidence level where there is a 10% chance that the successful discovery will be equal to or more than this resources estimate.

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using

established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more

contingencies. Contingent Resources have an associated chance of development (economic, regulatory, market and facility, corporate commitment or political

risks). The estimates herein have not been risked for the chance of development. There is no certainty that the Contingent Resources will be developed and, if

they are developed, there is no certainty as to the timing of such development or that it will be commercially viable to produce any portion of the Contingent

Resources.

In this presentation total volumes of resources have been expressed for high case estimates, low case estimates and best case estimates for both Contingent

and Prospective Resources. These total volumes are arithmetic sums of multiple estimates of Contingent and Prospective Resources, as the case may be,

which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of

individual classes of resources and appreciate the differing probabilities of recovery associated with each class as explained in this section.


20/20

20


Currency

Unless otherwise stated, all dollar figures set out in this presentation are in United States dollars.

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.

Additional Financial Measures

This presentation may contain the following financial terms that are not considered measures under IFRS: operating netback, net adjusted net earnings from

operations, funds flow from operations, adjusted earnings from operations and EBITDA. These non-IFRS measures do not have any standardized meaning and

therefore are unlikely to be compared to similar measures presented by other companies. These non-IFRS financial measures are included because

management uses the information to analyze operating performance, leverage and liquidity. Therefore, these non-IFRS financial measures should not be

considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

acquisition of petrominerales by pacific rubiales

Documents