Pacific Rubiales Energy Corp. has reached an agreement with BPZ Resources, Inc. to enter into a series of transactions ultimately resulting in the acquisition of beneficial ownership of a 49 percent undivided participating interest (the "Participating Interest") in the Z-1 exploration and development block ("Block Z-1"), offshore Peru. Under the terms of the agreement, Pacific Rubiales will pay $150 million in cash and is subject to a commitment of $185 million for BPZ's share of capital and exploratory expenditures in Block Z-1.
Once the Company 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.
"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. These are oil weighted assets with excellent running room to expand production, in a country that we see a lot of opportunity. We consider this to be an attractive deal for both companies," said CEO Ronald Pantin.
The Company believes that the assets underlying the Participating Interest are high quality with significant exploration and development upside. BPZ currently holds a 100 percent working interest and is operator under the license relating to the block. BPZ's acreage in Block Z-1 encompasses an area of approximately 555 thousand 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, 2012 was approximately 3,880 bopd, all from the Corvina and Albacora fields. All oil is sold in the domestic markets at world reference prices. The current (year-end 2011) total proved ("1P") gross oil reserves on Block Z-1 was estimated by BPZ's independent reserves evaluators to be 34.7 MMbbl and total proved plus probable ("2P") gross oil reserves were 93.9 MMbbl.
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