Pacific Rubiales Joins BPZ Energy In Peru Concession

To purchase 49% undivided participating interest in 550,000-acre Z-1 block offshore Peru.

Pacific Rubiales Energy Corp., Toronto, (Toronto: PRE) plans to acquire a 49% undivided participating interest in the Z-1 exploration and development block offshore in Peru from BPZ Energy, Houston, (NYSE: BPZ) for US$335 million in cash.

Pacific Rubiales will pay US$150 million in cash for the 49% stake and also make a series of transactions totaling $185 million for BPZ's share of capital and exploratory expenditures in Z-1.

BPZ currently holds a 100% working interest and is operator of the license relating to the block. BPZ's acreage in Block Z-1 encompasses an area of approximately 555,000 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 was approximately 3,880 barrels of oil per day, all from the Corvina and Albacora fields. All oil is sold in the domestic markets at world reference prices. Proved reserves as of year-end 2011 were 34.7 million barrels and proved and probable reserves were 93.9 million barrels.

Once Pacific Rubiales 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.

Pacific Rubiales chief executive Ronald Pantin says, “This is an exciting opportunity and an excellent fit with the company's strategy of generating profitable growth and diversifying our exploration and production portfolio. The acquisition complements our existing exploration acreage in Peru, and it provides us with first production in the country. The size of the deal is very manageable and allows us to preserve a strong balance sheet and maintain capital spending flexibility."

BPZ president and CEO Manolo Zunyiga says, “Our offshore operational expertise and well established presence in Peru, along with their operational expertise and track record of increasing production will strongly complement one another. This joint venture is an important part of our commitment to unlock the value of our assets with additional strategic investment to expand exploration and development of Block Z-1. With this agreement, a large portion of BPZ Energy's upcoming capital and exploratory budget on the Block will be funded."

Bank of America Merrill Lynch and GMP Securities LP are financial advisors to Pacific Rubiales. Credit Suisse and Tudor, Pickering, Holt & Co. is financial advisors to BPZ Energy.