Exploration: the platform for growth
Exploration is the foundation of the Company’s success, and the way forward.
The Company has one of the most successful and knowledgeable exploration teams in the Andean region. The Company’s exploration program is one of the cornerstones of its strategy and the key to its continued growth. The Company’s main goals of increasing reserves and production will be achieved through discoveries made by its exploration team.
The Pacific Rubiales exploration team is dynamic and creative, and combines world-class experience with cutting-edge technology to delineate and secure production for the future.
OVERVIEW
In 2010, the Company’s exploration acreage reached 16,619,501 acres, a 28% increase since 2009. The Company’s high-quality acreage position is the largest of any independent oil and gas E&P in Colombia. The increase in acreage came from the addition of eight new blocks, two in Guatemala and six in the Llanos-Putumayo Basins in Colombia.
During 2010, the Company made a net capital investment in exploration of $112 million, and drilled a total of 29 wells: 7 exploratory, 9 appraisal and 13 stratigraphic, of which 24 wells were successful, representing a success ratio of 83%. The Company also acquired 1,609 km of 2D seismic and 401 km2 of 3D seismic and 13,133 km of high-resolution aerogravimetric and aeromagnetometric surveys. Throughout 2010, the Company concentrated its exploration efforts on the Quifa, CPE-6, Guama, Topoyaco, La Creciente and Buganviles Blocks.
All these efforts are part of the Company’s five year plan to increase its gross operated production to 500,000 boe/d.
LOOKING AHEAD 2011
The Company’s exploration program for 2011 is budgeted at $340 million and includes exploration across 26 blocks, in which 59 wells will be drilled: 20 exploratory as well as 36 appraisal and 3 stratigraphic. In addition, 5,390 km of 2D seismic and 440 m2 of 3D seismic is planned for the year.
FOCUS ON QUIFA AND CPE-6
Unlocking the Next Major Producers
The Quifa Block is located in the Llanos Basin and surrounds the Rubiales field. The API at Quifa is 13.5° and the Company has a 60% working interest with Ecopetrol (40%); the Company’s exploitation contract at Quifa terminates in 2031. The Quifa Block is highly prospective, and strategically located in close proximity to the existing transportation capacity and infrastructure of the Rubiales field. The Company will look to develop Quifa aggressively in the coming years, as a future key asset that will drive Pacific Rubiales’ continued production growth.
In Quifa, SW 8 exploration/appraisal wells and 30 development wells were drilled during 2010, increasing net 2P reserves by 57.94 MMbbl, an increment of 76.7%. This is attributable to the successful step-out drilling in the commercial area that allowed the extension of 12,214 acres of the reservoir to the south in to the area of Prospect "J".
In Quifa North, 7 successful wells on Prospects “A”, “F” and “Q”, confirmed the presence of a hydrocarbon column incorporating 25.73 MMbbl of newly attributed gross certified 2P undeveloped reserves.
Over the year, the wells were mainly in the northern section of Quifa, continuing the exploration/delineation campaign for Prospects “A”, “F” and “Q". As of January 31, 2011, the Company has drilled 6 wells showing commercial hydrocarbon columns in the northern part of the block: Quifa-6, Quifa-24X, Quifa-26X, Jaspe-1 ST-2, Jaspe-3 and Ambar-1. The success of the 2010 drilling campaign reaffirms the large- scale hydrocarbon potential of the northern Quifa Block.
During the year, exploratory wells Quifa-6 and Ambar-1 were successful. Quifa-6 was completed as an oil producer, while Ambar-1, which confirmed the extension of the “F” prospect to the southwest with 16 feet of net pay, is currently undergoing testing. Appraisal wells Quifa-14, Quifa-18, Quifa-31, Quifa-32, were also successful and completed as oil producers. The Jaspe-1 ST2 appraisal well, drilled in the northern part of the block, confirmed the presence of a new reservoir compartment for Prospect “A”, with 12 feet of net pay and is currently undergoing testing.
The Company drilled eight stratigraphic wells during 2010 to determine the presence of hydrocarbons in the block. The Company drilled three stratigraphic wells in the first quarter of 2010, with two wells confirming the presence of hydrocarbons in the northern part of Quifa. Five stratigraphic wells were drilled in the second quarter of 2010. Wells Quifa-28X, Quifa-33X, and Quifa-34X did not show any evidence of oil accumulation in the southeastern and northeastern part of the block, indicating a stratigraphic control on the compartmentalization and distribution of the reservoir. The Company also drilled Quifa-20X and Quifa-22X, and confirmed the presence of hydrocarbons in the northwestern border of the commercial area, indicating that the southwestern, producing area of Quifa can be extended to the commercial northwest portion of the block. The Company drilled the remaining two stratigraphic wells in the fourth quarter of 2010: the Jaspe-3 stratigraphic well in prospect “A”, which was successful, and the Ambar-3 stratigraphic well in Prospect “F”.
Declaration of Commerciality
The success of the 2010 exploration campaign in Quifa resulted in the Company declaring commerciality for over 40,000 hectares in the Quifa SW area. The results of the exploration campaign on Quifa North, along with the successful appraisal campaign in Quifa SW have ensured the production potential of the Quifa Block, where the Company is making the necessary investments to allow for production of 60,000 bbl/d by the end of 2011. This is significant to the Company’s long-term plans to develop the Llanos Basin, since the declaration of commerciality at Quifa demonstrates the prospectivity and viability of this region for years to come.
Looking Ahead 2011
The Quifa exploration plan for 2011 includes the drilling of 20 wells: 5 exploratory, 12 appraisal and 3 stratigraphic, excluding Ambar-3. These drilling efforts intend to convert the already certified 251 mmbbl gross resources into 2P reserves. In addition, the Company plans to process and interpret 294 km2 of 2D seismic which will help the Company evaluate prospectivity in the furthermost northern and eastern parts of the block.
The 2010 drilling results for CPE-6 reaffirmed its petroleum potential. It is the Company’s belief that during the 2011 exploration phase, the CPE-6 Block will prove to be one of the most significant oil discoveries in the Colombia Llanos. The Company started its exploratory campaign at the CPE-6 Block in 2010 with the drilling of five stratigraphic wells: Guairuro-1, Guairuro-2, Guairuro-3, Guairuro-4 and the start of Guairuro-5.
Similar to the previously drilled Guairuro-1 and 2 stratigraphic wells, the Guairuro-3, 4 and 5 (2011) wells were drilled with a 6 1/8” slim design, and were continuously cored along the Carbonera C-7 interval. All the wells showed significant oil impregnations, close to 30 feet at each well in all the cored intervals within the C-7 interval. The C-7 interval also showed high shale content. Therefore, it is interpreted that this basal unit pinched-out east of the Guairuro-3 well, north of the Guairuro-4 well and eastnortheast of the Guairuro-5 well, but very close to the wells’ locations. The presence of oil in the nine wells drilled in CPE-6 North, is evidence that the petroleum system reached the area where these wells are located, and furthermore, may indicate that the boundary of the prospect may be located to the west, south and northeast, and possibly close to the location of the three wells.
With the information obtained from these three wells, a minimum preliminary area of 63,000 acres for the prospect has been estimated with a trap size extended an additional 6, 9 and 7.5 km to the south, west, and northeast, respectively, of the previously drilled wells. The Company is also preparing to drill the last well of this initial campaign, the Guairuro-6 well, 10 km south of the Guairuro-4 well, so as to evaluate a possible reservoir compartmentalization of the pay units, as well as the south-headed oil-spilling from the location of the Guairuro-4 well. With the upcoming drilling of the Guairuro-6 well, the Company will complete its commitments under the TEA phase of the CPE- 6 contract and fulfill its contractual commitment with the ANH.
Looking Ahead 2011
In 2011, the Company will drill the last two stratigraphic wells to fulfill the commitment of the TEA with the ANH, and migrate the agreement into an E&P Contract. The Company is also preparing the necessary technical documentation and permitting to begin an exploration/appraisal campaign to further delineate oil accumulation. This campaign is slated to begin in the third quarter of 2011, subject to the Company obtaining the appropriate licenses.
Since the Company declared commerciality at Quifa, the Company is making the necessary investments to allow for production of 60,000 bbl/d by the end of 2011.
LOWER, MIDDLE, AND UPPER MAGDALENA VALLEY BASIN
Leveraging our Knowledge of the Magdalena Valley
In 2010, the Company focused its efforts in the Lower Magdalena Basin on exploring the Guama and La Creciente Blocks.
GUAMA BLOCK
At Guama, the Company drilled one exploratory well in 2010, Pedernalito-1X. The well reached a final depth of 7,100 feet MD and resulted in a new gas discovery, indicating a total of 29 feet of net pay in the low-resistivity, thinly laminated sands in eight different zones. Average porosity was 11% with an average water saturation of 59%.
LA CRECIENTE BLOCK
The Company drilled the Apamate-1X exploratory well in the LCA-south prospect, located south of La Creciente “A” and La Creciente “D” gas fields. The well reached a total depth of 12,012 feet MD, and the well found what was initially correlated as the Ciénaga de Oro at 11,135 feet MD (10,611 feet TVDSS) in an 8 1/2 hole, which showed 53 feet of a sandstone package with some interlayered siltstones. During the initial test the well achieved a gas production in excess of 24 mmcfd with a well head flowing pressure of 3,730 psig, restricted by the flow capacity of the test facilities.
The prospective interval is defined in what is now interpreted to be a sequence of on-lapping, gas-bearing sands, at the base of the Lower Porquero Formation. The petrophysical evaluation based on cased-hole logs, LWD, ditch cuttings and mud-logging data, shows average porosity and water saturation of 17% and 23% respectively, in a gross interval of 53 feet with a net-to-gross ratio around 70%.
The positive results of this well not only added to the Company’s natural gas reserve base by adding net 2P of 9.63 mmboe, but will also reinforce the potential of the La Creciente block, opening the window to further exploration in the area.
During 2011, the Company plans to drill two additional appraisal wells 500 feet down dip of the Apamate-1 well where the seismic inversion exhibited the strongest anomalies.
The Company’s exploration activity in the Upper and Middle Magdalena Basin was concentrated in the Buganviles Block, with the drilling of two exploratory wells: Visure-1X and Tuqueque-1X.
BUGAMVILES BLOCK
The Visure-1X exploratory well was drilled in the Visure Prospect, located to the southern part of the block. The well was successful, resulting in a new discovery with a total net pay of 114 feet in three intervals: Barzalosa (24.5 feet), Upper Guadalupe (45.5 feet) and Lower Guadalupe (44 feet). The Company is currently well-testing and is producing an average of 46 bbl/d and 14 bwpd. The well has been suspended pending test evaluation results.
Tuqueque-1X well has shown two additional prospective intervals at the Tuqueque Prospect: Monserrate and El Cobre formations, with 31 feet and 9 feet net pay, respectively.
In 2010, the Company’s exploratory program for the Putumayo Basin consisted of drilling of two exploratory wells at the Topoyaco Block, Topoyaco-1 and Topoyaco-2.
Topoyaco-2 has been suspended awaiting resource and economic evaluation of the well. The suspension came after the well was re-evaluated with a higher capacity Electro-Submersible Pump (“ESP”) in the upper Villeta N-sands, which the operator now believes could be a sandy facies known in other areas of the Putumayo foothills as the Neme member of the younger Rumiyaco formation. The new test was performed to determine the true production potential of the well, which was tested originally with a lower-capacity ESP and resulted in very erratic oil and water production rates.
During 2011, the Company will conduct drilling at Prospect D on this block, which has been certified, at the best estimate, with 46.907 mmbbl of prospective resources.
Quifa Block
