Pacific Rubiales Grabs Colombian O&G Company for $168MM

Pacific Rubiales Energy Corp. has executed an agreement to acquire 100% of Kappa Energy Holdings Ltd. for a cash payment of approximately US$168 million, subject to minor post-closing adjustments.

Kappa is a Colombian oil and gas exploration and production company which holds exploration and production licenses in Colombia, where it has been operating since 1997. Kappa has a commanding land position, operating nine blocks with a 10 year track record.

Kappa has gross acreage of 747,000. This acreage consists of nine leased blocks in the Catatumbo, Lower, Middle and Upper Magdalena, and Llanos basins of Colombia, with the following net working interests: Abanico (22.5% in the production area and in the Santana and Casablanca exploration areas, with 23.8% and 14.8% working interests, respectively, and 30.5% working interests in the remaining exploration areas), Alhucema (50%), Arrendajo (32.5%), Cerrito (average 75%), Chipalo (50%), Cicuco (100% for gas and oil), Guasimo (100%), Buganviles (49%) and Las Quinchas (50%).

The Abanico contract area includes the main oil producing field, Abanico (4,100 gross barrels per day) and gas producing field, Ventilador (4.3 gross million cubic feet per day). Three of the exploration contracts, with the ANH
(Guasimo, Alhucema and Arrendajo), are in the drilling phase and the other two, with Ecopetrol (Chipalo and Buganviles), are in the exploration phase. Acacia Este (part of the Las Quinchas block) offers the largest exploration potential.

Kappa has a strong existing reserve base with, as of May 31, 2008, approximately 9.3 million barrels equivalent (MMboe) of proven and probablereserves and 24.0 MMboe of proven, probable and possible reserves. In addition, 116 MMboe of prospective resources have been identified in the best estimate case. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. All the reserve numbers quoted above are net before royalties.

Pacific Rubiales believes that this acquisition not only expands the resource base of the company, but also enhances the future exploration potential by adding new blocks that the company believes are highly promising.
Pacific Rubiales is confident that the application of state of the art technology plus the proven track record of its management will add value to the newly acquired assets.

Ronald Pantin, the company's CEO, stated, "The execution of this agreement confirms our commitment to continue searching for the best available exploration and production assets in the region and underlines our drive to make Pacific Rubiales the largest independent oil and natural gas company in the region."

GMP Securities L.P. has been retained as the exclusive financial advisor in connection with this transaction. As part of the scope of its retainer, GMP will examine various financing options and report such options to the Board of Directors of Pacific Rubiales. Closing of the acquisition is expected to be completed in early September 2008. Completion of the acquisition is subject to customary conditions of closing and the receipt of certain regulatory approvals.