Calgary firms to recapitalize Brazil Reconcavo explorer

Pacific Rubiales Energy Corp. will acquire Petrominerales Corp. in a transaction valued at $1.6 billion (Can.) and will capitalize it in Calgary as ExploreCo with $100 million (Can.) in cash and all Petrominerales assets in Brazil.

The board of Petrominerales has recommended that its shareholders approve the deal at a meeting to be held by the end of November.

Petrominerales said it reached agreement to acquire its partner’s entire 25% interest in certain Petrominerales Brazil properties.

ExploreCo will hold 120,013 gross acres (119,321 net acres) focused on the Reconcavo basin onshore Brazil.

The transaction “is a culmination of Petrominerales’ exploration and development successes in Colombia and Peru,” said Corey C. Ruttan, president and chief executive officer.

“Over the past 11 years, we have discovered over 100 million bbl of oil in Colombia, grown production to over 23,000 b/d of oil, returned over $150 million (Can.) to shareholders through dividends, generated over $700 million (US) of royalties and tax revenue for Colombia, and established Fundacion Vichituni investing in highly successful voluntary social investment programs creating a lasting benefit to local communities.

“Since our initial public offering in 2006, at $3.75 (Can.) per Petrominerales share, Petrominerales shareholders have earned a compound annual rate of return of over 20% on their original investment, including dividends and the value of this arrangement.”

ExploreCo, in addition to its cash position, will hold 100% of Alvopetro SA Extracao de Petroleo e Gas Natural after it has acquired 25% interest from the present partner. Alvopetro holds all of Petrominerales’ Brazil exploration assets consisting of three producing fields and 12 exploration blocks comprising 120,013 gross acres onshore Brazil.

The assets are in the Reconcavo basin 85 km north of Salvador, Brazil. More than 6,000 wells have been drilled in the basin, with cumulative production above 1.5 billion bbl of light oil from 86 fields. Current production is over 60,000 b/d of oil equivalent. The majority of the basin's production comes from the Sergi, Agua Grande, and Candeias reservoirs.

ExploreCo’s primary target is the Gomo member of the Candeias formation, which is both mature source rock and contains the prospective reservoir sands. The Gomo is oil saturated and found at depths of 2,500-3,200 m across the existing acreage.

Other operators have drilled 24 wells that have identified thick, stacked, oil-bearing sands. The Gomo net pay on these blocks ranges between 10 and 200 m, averaging 44 m thick with porosities of 9-15% and permeability of 0.1 to 4 md. Oil quality is 34-38° gravity.

ExploreCo plans to commence civil works for an initial drilling campaign in mid-October and start drilling the first well on Block 197 in November 2013. This will be followed by wells at Bom Lugar and Block 183. The goal with these initial wells is to demonstrate the commercial viability of the Gomo sands providing the foundation for a large-scale commercialization.

ExploreCo asset include the land base and large Gomo resource with more than 1 billion bbl of undiscovered petroleum initially in place and more than 100 potential development locations. Also, shallow exploration potential includes three conventional exploratory prospects on Block 177 with an estimated potential of 133 million bbl.

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