Frontera Energy

PACIFIC EXPLORATION AND PRODUCTION (PACIFIC E&P)

Company type	Public
Traded as	TSX: PRE BVC: PREC
Industry	Oil and Gas
Founded	2009
Headquarters	Toronto, Canada
Key people	Ronald Pantin, (CEO)
Revenue	US$ 4.6 billion (2013)
Operating income	US$ 1.1 billion (2013)
Net income	US$ 430.4 million (2013)
Number of employees	2,506
Website	www.pacific.energy/en/

Pacific Exploration and Production Corp. (former Pacific Rubiales Energy Corp.) is a publicly held Canadian company and a leading explorer and producer of natural gas and crude oil. The Company has a diversified portfolio of assets with operations in Colombia, Guyana, Peru, Papua New Guinea, Guatemala, Brazil and Belize.

Pacific E&P owns 100% of Petrominerales Ltd., which has light and heavy oil assets in Colombia and oil and gas in Peru; 100% of Meta Petroleum Corp., a company that operates in the heavy oilfields of Rubiales, Piriri and Quifa in the Los Llanos basin (Colombia); and 100% of Pacific Stratus Energy Colombia Corp., through which it operates various oil and gas fields including La Creciente in the Sucre department in northwestern Colombia.

Pacific E&P’s strategy is focused on sustainable growth in production and reserves and cash generation. It is committed to conducting business safely and in a socially and environmentally responsible manner. Since 2013, Pacific E&P is part of the Dow Jones Sustainability North America Index. In 2014, it was recognized in the Sustainability Yearbook of Robeco SAM (a specialized firm focused on sustainability investments) as a worldwide sustainable oil and gas industry leader.

In 2014, for the third consecutive year, the Company was selected to be part of the Index of Global Leaders in Environmental, Social and Corporate Governance Issues by STOXX, an internationally integrated index provider. Pacific E&P’s common shares are traded on the Toronto Stock Exchange under the symbol “PRE” and on the Colombian Stock Exchange under the symbol “PREC.” The Company also has senior notes listed on the Luxembourg Stock Exchange that trade on the Euro MTF market.

In 2014, Pacific E&P’s production of oil and gas was distributed as follows:

• Heavy crude oil: 58%
• Light crude oil: 35%
• Natural gas: 7%

In 2014, Pacific E&P’s proven and probable (“2P”) net after royalties reserves were equivalent to 510.9 million barrels of oil.

History

Some of the most significant milestones in the history of Pacific E&P include:

2008

• Pacific Exploration & Production Corp. is born

On January 23, 2008, Pacific E&P was created from the merger between Pacific Stratus Energy and Petro Rubiales Energy. Both companies had strengths in complementary areas: Petro Rubiales in heavy crude oil, and Pacific Stratus Energy in natural gas.

• Beginning of production in La Creciente

Operations at the La Creciente block commenced in 2008, and the Company reached 35 million cubic feet in gas production per day.

• Increased crude production

The acquisition and development of various assets enabled production to rise by 36,571 barrels of oil equivalent per day (boe/d), and proven and probable net reserves were at 210 MMbbl

2009

• Recognition for health and safety management

In recognition of its occupational health and industrial safety policies, Pacific E&P was awarded the Green Cross Medal of Merit by the Colombian Safety Council.

• Integrated Management System certifications

The Company achieved ISO 9001, ISO 14001 and OHSAS 18001 Integrated Management System certifications, placing Pacific E&P among the top certified oil & gas companies.

• Compliance with international standards

In 2009, Pacific E&P became fully compliant with the SOX Index (US legislation on business management), reinforcing its commitment to industry regulations and standards.

• Los Llanos Pipeline in Colombia

In 2009, construction of the Los Llanos pipeline (ODL) was completed, and operations began in September. With this milestone, Pacific E&P (holding a 35% share in ODL) became an engine for growth in oil production and infrastructure development in Colombia.

With a length of 235 kilometres and a diameter of 24 inches, the pipeline connected the Rubiales oilfield with the OCENSA pipeline and made it possible to increase production and reduce the cost of crude transport so that 160,000 barrels of oil could be transported per day.

• 86% exploration success rate

Out of 22 wells drilled in 2009, 19 were successful (86%), which is unprecedented in terms of exploration success and exceeds industry standards.

• Increase in reserves

Proven and probable reserves increased by 34.3% for the Rubiales-Piriri, Quifa, La Creciente, Guaduas, Rio Ceibas, Abanico and Puli blocks in Colombia. By the end of the year, there was a cumulative total of 280.6 million barrels of oil equivalent after royalties.

• Production record in Rubiales and La Creciente fields

By the end of the year and ahead of schedule, Pacific E&P reached two important goals: the Rubiales oilfield delivered a production of 100,000 barrels of oil per day and the La Creciente field achieved record gas production of 61.8 million cubic feet per day.

• Admission to the Colombian Stock Exchange

In December 2009, Pacific E&P became the first foreign company listed on the Colombian Stock Exchange.

2010

• Operations in Guatemala

Eight new blocks were added to Pacific E&P’s exploration portfolio; two in Guatemala and six in Colombia. This represented an increase of 28% in exploration assets.

• Participation in the Bicentenario Pipeline

In November of 2010, Pacific E&P acquired a 32.88% share in Colombia’s Bicentenario pipeline, which was subsequently reduced to a 27.6% interest in 2014.

• 75% increase in net production

Pacific E&P’s net production grew 75% in 2010 with an increase of 61,683 barrels of crude per day, reaching an average of 144,307 barrels of crude per day by the end of the year. Rubiales and Quifa fields had the most significant contributions to the production growth.

• Strengthening of infrastructure

The increase in production in 2010 was also achieved as a result of the expansion of production facilities and infrastructure in La Creciente and from an improvement in operational safety.

• Financial growth

In 2010, Pacific E&P had significant growth in its financial results, increasing from a net loss of US$125.8 million in 2009 to a net profit of US$217.6 million in 2010; revenue increased 160% by the end of the year (US$1.7 billion) and EBITDA (profit before deductions) for the Company was US$922.9 million, an increase of more than 210% from 2009.

• Exceptional reserves

Total proven and probable reserves of crude oil equivalent were 322.42 million gross barrels (before royalties).

• Second-largest Colombian oil company

In 2010, Pacific E&P went from being a company dedicated exclusively to the domestic market in Colombia to becoming the second largest Colombian oil company in the Latin American, United States, European and Asian markets.

2011

• Production milestone

In April 2011, a significant production milestone was achieved: the Rubiales and Quifa Fields reached a combined production level of 200,000 barrels of oil per day.

• Record in La Creciente

On September 8, record production was also achieved in the La Creciente Field: 70,721 million cubic feet per day of gas, the highest level of production reached in this field’s history.

• Participation in Peru

On October 12, Pacific E&P acquired a 50% share in the Block 116 exploration contract located in northeastern Peru, with an area of 6,600 square kilometres.

• Record-breaking pumping

In November, the PF2 unloading yard in Guaduas and the Guaduas–La Dorada pipeline reached a monthly oil pumping record with 1,001,319 barrels transported.

2012

• Robust asset portfolio

On February 23, Pacific E&P reported an increase of 52% in net reserves during 2011, reaching 407 million barrels. This was due to a high level of exploration success, which reached 83%.

• Stake in Peru

On April 27, Pacific E&P announced the acquisition of a 49% interest in Block Z-1 in offshore Peru.

• Entry in Papua New Guinea

On April 30, Pacific E&P signed a binding agreement with Interoil Corporation to acquire a 10% net share in the PPL237 oil-prospecting licence and in the Triceratops structure located in PPL237 in onshore Papua New Guinea.

• Acquisition of PetroMagdalena

On July 27, Pacific E&P completed the acquisition of PetroMagdalena Energy Corp. In connection with the acquisition, the Company acquired interests in the Cubiro, Mecaya and Topoyaco blocks in Colombia.

• Investment in Pacific Infrastructure

On August 13, Pacific E&P announced a total investment of US$50 million in Pacific Infrastructure, which at that time was developing a new terminal and port for oil and other products (Puerto Bahía) in Cartagena, Colombia, as well as a new oil pipeline to connect Cartagena with the port of Coveñas.

• Participation in Karoon (Brazil)

On September 18, Pacific E&P acquired a 35% interest in the Karoon Blocks located in the Santos Basin in offshore Brazil.

• Acquisition of C&C Energía Ltd.

In December 2012, Pacific E&P acquired C&C Energía Ltd., a Canadian company with operations in Colombia, which then merged with Pacific Stratus Energy. As a result of the acquisition, the Company acquired the Cravoviejo, Cachicamo, and Llanos-19 blocks, all located in the Llanos Basin in Colombia.

2013

• Recognition by the Colombian Stock Exchange

Pacific E&P was awarded with IR Recognition by the Colombian Stock Exchange, which is given to companies for their good practices with respect to investors.

• Admission to Dow Jones Sustainability Index

Pacific E&P joined the Dow Jones Sustainability Index – North America, which recognizes the companies with the world’s highest sustainability standards. Qualifying companies must meet over 50 requirements.

This major milestone further promotes sustainability throughout Pacific E&P’s entire value chain and strengthens the Company’s day-to-day commitment to building a sustainable environment.

• Acquisition of Petrominerales

In connection with the acquisition of Petrominerales for CDN$1.6 billion, the net production of Pacific E&P reached approximately 150,000 barrels of oil equivalent per day.

• Patent approval for STAR technology in Colombia

The Office of the Superintendent of Industry and Commerce in Colombia granted a patent to Pacific E&P for its proprietary Synchronized Thermal Additional Recovery (STAR) technology, giving it intellectual property and exclusivity rights in Colombia for a period of 20 years.

• Environmental licences for CPE-6 and Guama Blocks

Pacific E&P received the necessary permits from the Colombia National Environmental Licence Authority (ANLA) to proceed with the exploration and development activities planned for its CPE-6 and Guama Blocks.

• Pacific E&P earns Energy Efficiency Certification

In 2013, the Company became the first oil company in Colombia to receive the ISO 50001 certification in energy efficiency for its well production water injection system in the Rubiales and Quifa fields.

• Los Llanos Electrical Power Line

Pacific E&P completed field construction of the Los Llanos power transmission line (“PEL”) in 2013. The aim of this project was to reduce CO2 emissions and replace the self-generation of energy in oil production fields, which were being powered by burning fossil fuels.

This was another major step in the consolidation of the Company’s business model in terms of supporting sustainability and reiterating its commitment to the environment. The PEL has 551 kilometres of fibre optic lines and 549 towers with a capacity of 192 megawatts.

2014

• Oil discovery in Los Ángeles well in Peru

Pacific E&P discovered crude oil in the Los Ángeles–1X well located in Block 131 in Peru. The well started drilling in the middle of September 2013 and reached a total depth of 12,409 feet by the end of November.

• Oil in the CPE-6-1X exploratory well

One month after obtaining the environmental licence for the CPE-6 Block, the Company completed drilling of the CPE-6-1X exploratory well, which confirmed the production potential of the reservoir through an initial production test of five days (half the time that had been originally planned).

• “The Sustainability Yearbook 2014” Feature

Pacific E&P was included in “The Sustainability Yearbook 2014,” a prestigious annual publication that highlights the world’s leading companies in sustainability. The Company was noted in the oil and gas sector for its committed and responsible work with its stakeholders and the environment.

• Canadian Dealmakers Award

Pacific E&P received the Canadian Dealmaker’s award in the category of “Foreign Outbound (Global)” for its acquisition of Petrominerales Ltd. in 2013. The selection panel noted Pacific E&P’s business strategy, which, aligned with the Company’s projections, secured its position as one of the world’s fastest growing companies.

The Canadian Dealmakers program recognizes participants who have made a significant contribution to the M&A market. The awards honour Canadian companies and individuals whose business transactions have significantly impacted the industry through the categories of innovation and growth, establishment of best practices, refinement of customer needs and products, and creation of value.

• 613 million barrels of 2P net reserves

With a growth of 20% in net 2P reserves, the Company achieved a reserve replacement ratio of 320%. The reserve life index of net 2P reserves remained at 13 years, about twice the average in Colombia.

• Two new light oil discoveries in Guatiquia and Canaguaro blocks in Colombia

These discoveries are the result of a drilling campaign during the first quarter of 2014, which included 8 exploratory wells and 8 appraisal wells.

• Exploratory success rate of 77%

In 2014, Pacific E&P achieved an exploratory success rate of 77%. Out of 56 exploratory wells drilled, 43 discoveries were made.

2015

• Exploratory success in Brazil

During the first half of the year, Pacific E&P produced positive results in the Kangaroo-2 and Echidna-1 wells. The first well is located in Block S-M-1165 and flows oil at 3,700 bbl/d, and the second well was drilled in Block S-M-1102 and flows oil at 4,650 bbl/d. Both blocks are in the offshore Santos Basin in Brazil.

Pacific E&P has a 35% participating interest in the blocks, and Karoon Gas Australia Ltd., which is the operator, holds the remaining 65%.

• Operation of the largest field in Peru

In 2015, Pacific E&P was awarded a two-year contract to operate Block 192, the largest field in Peru located in the Northern Marañon Basin with a current production of approximately 12,000 bbl/d of heavy oil, which represents 17% of Peru's total oil production. The block has a total of 17 light, medium and heavy oil fields and production comes from 12 of these fields.

• Pacific Rubiales becomes Pacific Exploration & Production

In 2015, Pacific Rubiales announced its corporate name change to Pacific Exploration and Production (Pacific E&P). The name change reflects the internationalization of the Company and its diversified portfolio of assets in seven countries: Colombia, Guyana, Peru, Papua New Guinea, Guatemala, Brazil and Belize.

• Pacific E&P was listed in the DJSI North America for the third consecutive year

In 2015, the Company is part of the top nine O&G industry leaders in North America, The 15 companies listed this year for the oil and gas industry include other major companies such as Chevron, ConocoPhillips, and ExxonMobil.

Pacific improved its index scores in the three existing criteria: economic, environmental, and social. Pacific received top marks in indicators such as occupational health and safety, labor practice and human rights, water related risks, biodiversity, and stakeholder engagement.

• New majority shareholders of the company

In May 2015, O'Hara Administration, an international investor group led by Alejandro Betancourt López, became the largest shareholder of the company, controlling 19.5 percent of the shares. In August, Betancourt became part of the board of Pacific E&P.

Sustainability

Pacific Exploration & Production Corp. has the opportunity of using the natural resources of the countries where it operates in a responsible manner, generating sustainable development and greater social, regional and inter-generational equity, while achieving its goal of providing the society with energy.

To achieve this goal, the Company seeks to exceed expectations for the area and reach beyond economic results.

Pacific E&P corporate vision aims to create value, hand-in-hand with its stakeholders, in order to build a mutually beneficial relationship that enhances everyone’s competitiveness and obtains the best results and innovative solutions to meet the needs of the surrounding areas, as well as creating opportunities for present and future generations.

Sustainability and Shared Value Model

In order to guarantee the sustainable and profitable performance of the business, Pacific E&P is continuously working to generate shared value while encouraging prosperity in the areas of influence. The Company has focused its efforts on seven commitments that promote value for its internal and external stakeholders:

• Work in harmony with the environment

Pacific E&P is aware of the environmental impact of the operations; therefore, the Company always seeks to operate without compromising the future of the natural resources.

• Contribute to the sustainable development of communities

Through the development of the business, Pacific E&P aims to contribute to the solution of problems in the local economy, as well as helping attain prosperous and sustainable regions, even after oil activities have ended there.

• Respect and promote human rights in our operations

For the Company is of paramount importance to respect the integrity of the stakeholders and build relationships based on trust and legitimacy.

• Act consistently and transparently

Accountability provides space for continuous improvement and innovation. It increases trust in the Company, allowing to build reputation, and is a key piece in achieving results.

• Operate with excellence

Pacific E&P seeks to tie barrels to a legacy, which is why the Company has a high rate of exploration and production success. Pacific E&P works under the highest health and safety standards and enters markets that provide high profitability.

• Promote a sustainable supply chain

For Pacific E&P is fundamental to act hand in hand with the strategic partners.

• Have the best talent

Pacific E&P is an organization of individuals who think about the society and the communities in which the Company is involved.

Awards

• Dow Jones Sustainability Indices (DJSI) – North America

In 2015, Pacific E&P was listed in the DJSI North America for the third consecutive year. The Company is part of the top nine O&G industry leaders in North America, along with important companies such as Chevron, ConocoPhillips, and ExxonMobil.

This year, Pacific improved its scores in all criteria: economic, environmental, and social. Furthermore, the Company excelled in indicators such as labor practice and human rights, biodiversity, water related risks, occupational health and safety, and stakeholder engagement.

The DJSI, launched in 1999, measures the performance of the world's sustainability leaders. The indices allows investors to appropriately benchmark sustainability-driven funds and derivatives over the long term.

• EO100 Standard

Pacific E&P was certified with ‘Sustainable Barrels’ under the EO100 Standard. The Company received a score of 100/100, which indicates that operations at Quifa and Rubiales oilfields use the best practices in the industry in terms of social and environmental performance.

EO100 Standard is the only multiparty certification system that evaluates social responsibility and environmental practices at oil and gas exploration and production sites.

• Voluntary Principles on Security and Human Rights

Pacific E&P was chosen to be one of the 28 companies that are a part of this international initiative, which offers practical guides for companies that operate in zones of conflict or with fragile governance. These guides ensure that public and private security forces that are responsible for protecting operations act within a framework that is respectful of human rights.

• CIPS Certification

UK’s Chartered Institute of Purchasing & Supply (CIPS) awarded Pacific E&P with the Purchasing Policies, Processes and Procedures Certification (PPP) in September 2012 for its efficient actions in the development of Supply Chain Management.

The certification is widely acknowledged in the hydrocarbon sector, and Pacific E&P and Ecopetrol are the only certified companies in Latin America.

• Women Together

The organization Woman Together recognized the social, environmental, human rights, and ethics work of Pacific E&P. This award is an important recognition of the Company’s sustainable model and management.

Women Together is a non-profit organization formed by a multidisciplinary team, which is associated with the United Nations.

• CorpU Awards

CorpU awarded ‘Best Overall Corporate University’ to Pacific Corporate University (PCU) among 100 candidates. CorpU recognized that Pacific’s achievements in many of the categories make the PCU platform a truly transformative force within the organization. PCU also won awards in the following categories: Branding, Alliances, and Leadership.

CorpU is an education technology firm focused on empowering innovation, problem solving, and strategic thinking, by unlocking the potential of an organization’s talent and leadership teams.