PetroLatina Discovers Oil in LA Field

PetroLatina provided an operational update on developments at its La Paloma, Los Angeles and Santa Lucia fields.

La Paloma Block

Colon-1 and Colon-2 pump installation

The installation of electrical submersible pumps (ESPs) was completed in June 2010 in both the Colon-1 and Colon-2 wells. The Colon-1 ESP is currently producing at a rate of approximately 320 barrels of oil per day (“bopd”) gross at a low pump speed to prevent sand entry, and the Colon-2 ESP is producing at a rate of approximately 540 bopd gross also at a relatively low pumping rate. The installation of the ESP's has increased production of these two wells from 450 to 860 bopd gross. This ESP lifting system is currently being closely monitored and the speed of both pumps is gradually being increased in order to achieve anticipated production rates higher than the current levels.

Colon-3 sidetrack development well

The Colon-3 sidetrack well (Colon-3 ST) was logged in early June 2010 and has now been completed. Initially, 78ft of the new channel sand found in the field which has been proven to be oil bearing will be tested. A new workover rig is currently being moved to the location to evaluate all production zones. Following this initial testing, other intervals will be perforated (around 26ft net pay) including the main reservoir sand of the field that has 10ft of pay between 9,144 to 9,154ft.

The Company currently intends to present its commercial plan for the La Paloma field in October 2010 as soon as the environmental license required for exploitation has been approved by the Agencia Nacional de Hidrocarburos and the extended testing completed. Once approved, the 24 year exploration license term will commence.

Engineering studies have commenced relating to the design and construction of production facilities capable of handling up to 6,000 bopd of oil, and 1.2 MMSCFD of gas. Studies to determine the viability of power generation based on producing associated gas have begun, with the intention of reducing operating costs and improving stability in the availability of power for the field operation.

Tisquirama Association Contract - Querubin-1 exploratory well

The Company's first well drilled outside of the commercial area of the Los Angeles field was successful. This represents a new discovery, and the importance of the Querubin-1 well lies in the fact that it has confirmed the economic viability of a large area of thick oil bearing pay which will, with future drilling, allow this pay to be reclassified as Proven reserves. Querubin-1 is near the 1985 Los Angeles-2 well which, although it found a similar thick oil bearing sand, proved to be non-economic due to problems relating to sand production which damaged the pumping equipment. The development of Progressive Cavity Pumps (PCPs) designed specifically to handle sand production since that time has provided a solution and allowed the economic production of these reserves in the Querubin-1 well.

The main Lisama sand was perforated from 6,132ft to 6,335ft measured depth (203ft). The well is now being tested with a PCP and the well is expected to achieve a production rate of 250 bopd of 14° API oil, based on a good fluid level being observed at around 2,500ft. An extended test will be run for a period of 6 months. Production facilities with a capacity of handling up to 1,500 bopd exist on site.

Santa Lucia-5

PetroLatina announced that drilling of the Santa Lucia-5 well commenced on July 29, 2010. This well is a commitment well and is located in the south east part of the Santa Lucia field. The well is targeting a potentially oil bearing 30ft gross sandstone from the Eocene la Paz formation. It is planned to reach a total measured depth of 8,400ft. Drilling of this well will complete the Company's license commitments and with the satisfaction of these obligations the drilling programs in which the Company pays a disproportionate share of the costs will come to an end and, in the future, PetroLatina will bear its working interest share of costs and receive the same share of production.

New Workover and Well Service Rig

The Company is, in conjunction with Ecopetrol S.A. and PetroSantander (Colombia) Inc., its partners in the Tisquarama license area, in the process of acquiring a Workover and Well Service Rig. Ecopetrol S.A. and PetroSantander (Colombia) Inc. have both agreed to share their respective proportion of the acquisition and related costs of this rig, which will be operated by PetroLatina, and which will initially be used on the Tisquarama license area. Of a total cost of US $1.1 million, PetroLatina will pay 37.5%, representing its share of the cost.

Juan Carlos Rodriguez, Chief Executive of PetroLatina, said, "We are pleased with the developments at our La Paloma Los Angeles and Santa Lucia fields; in particular we have successfully installed ESPs in our Colon-1 and Colon-2 wells and commenced drilling operations on Santa Lucia-5 on July 29, completing the Company's license commitments.

"Progress with the Colon wells continues, we anticipate presenting our commercial plan as early as October 2010, following approval of the environmental license and completion of the extended test on the area.

"Initial results on our new Querubin-1 exploratory well are also encouraging, the well is now being tested with a PCP and we look forward to reporting results of current testing in due course."