Petrominerales Reports First Quarter Financials and Provides Operational Update Highlighted by Our Taya Oil Discovery

CALGARY, ALBERTA--(Marketwired - May 9, 2013) - Petrominerales (TSX:PMG)(BVC:PMGC) announces our 2013 first quarter financial results and an operational update highlighted by our Taya-1 oil discovery.

FIRST QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

• New oil discovery on our Corcel Block with our Taya-1 discovery;
• Potential new oil discovery on our Central Llanos acreage with our Curito-1 well. Well logs indicate hydrocarbon prospectivity in four different formations totaling 54 feet of potential net oil pay;
• Positive results from our heavy oil assets; Tatama horizontal well averaged 458 barrels of oil per day ("bopd") over 43 testing days in January and February and we realized $1.3 million of net revenue related to the sale of this production. Subsequent to March 31 we re-tested the well with a larger pump and the well averaged 633 bopd. No heavy oil reserves are reflected in our December 31, 2012 independent reserves report;
• Maintained our strong operating netbacks of $61.44 per barrel;
• The OCENSA pipeline restructuring was completed converting the pipeline from a cost model to a profit model effective February 1, 2013. We estimate our share of 2013 profits, to be paid through semi-annual dividends, will be approximately $28 million;
• Expanded our oil marketing business in Colombia and earned $3.3 million of operating cash flow through the purchase and re-sale of third party oil using under-utilized capacity on our pipeline assets;
• Generated funds flow from operations of $102.3 million, or $1.21 per share;
• Capital expenditures were $81.9 million, resulting in free cash flow of $20.4 million;
• Closed our previously announced secured credit-facility of US$250 million;
• Completed an accretive acquisition of the Canaguaro Block, located adjacent to our existing acreage, that includes 416 bopd and 2.3 million barrels of proved plus probable reserves;
• Engaged TD Securities Inc. as financial advisors for a formal process to pursue opportunities to monetize our pipeline assets; and
• Acquired two additional blocks in Brazil in the highly prospective Gomo trend.

Financial Highlights		Three months ended March 31,
($US millions, except where noted)		2013	2012	% change
Oil sales		254.1	333.0	(24	)
Funds flow from operations(1)		102.3	199.8	(49	)
	Per share - basic ($)	1.21	2.01	(40	)
	- diluted ($)	1.20	1.97	(39	)
Adjusted net income (loss)(1)		6.5	80.3	(92	)
	Per share - basic ($)	0.08	0.81	(90	)
	- diluted ($)	0.08	0.75	(89	)
Dividends declared		10.4	12.5	(17	)
Expenditures on PP&E and E&E(2)		81.9	218.4	(63	)

As at,	March 31, 2013	December 31, 2012	% change
Net working capital deficit(1)	77.2	129.9	(41	)
Long term debt	45.0	-	-
2016 convertible debentures with option to put in August 2013(3)	198.9	198.9	-
2017 convertible debentures(3)	400.0	400.0	-
Total assets	2,177.9	2,124.9	3
Common shares (000s)	84,579	84,464	-
Common shares and in-the-money dilutives (000s)(4)	86,473	86,883	(1	)

Operating Highlights		Three months ended March 31,
		2013		2012		% change
Production (bopd)
	Deep Llanos	14,273		23,596		(40	)
	Central Llanos	3,576		4,416		(19	)
	Neiva	2,722		3,746		(27	)
	Orito	1,210		2,226		(46	)
	Heavy oil	246		63		291
Production Colombia		22,027		34,047		(35	)
Production Brazil		36		-		-
Total production		22,063		34,047		(35	)
Inventory changes and other		66		(1,234	)	(105	)
Produced oil sales volumes		22,129		32,813		(33	)
Operating netback of produced oil ($/bbl)(1)
	Brent benchmark price	112.55		118.49		(5	)
	Discount - Brent to Vasconia	(5.38	)	(3.85	)	40
	Vasconia benchmark price	107.18		114.64		(7	)
	Discount Vasconia to sales price	(1.77	)	(3.12	)	(43	)
	Sales price of produced oil(5)	105.41		111.52		(6	)
	Transportation expenses(5)	7.62		6.83		12
	Realized crude oil price	97.79		104.69		(7	)
	Royalties(5)	14.61		11.79		24
	Royalties as a % of realized price	15	%	11	%	36
	Production expenses(5)	21.74		13.23		64
Operating netback of produced oil(1)		61.44		79.74		(23	)

1	Non-IFRS measure. See "Non-IFRS Measures" at end of this news release.
2	PP&E consists of property, plant and equipment assets and E&E consists of exploration and evaluation assets from the consolidated statement of cash flow.
3	Consists of the principal portion of the convertible debentures due in 2016 and 2017. The 2016 convertible debenture holders have a one-time put option right of prepayment of the debentures on August 25, 2013.
4	Consists of the sum of common shares, deferred common shares, incentive shares, and potential shares issuable on conversion of in-the-money stock options and convertible debentures outstanding as at the period-end.
5	Based on sales volumes of produced oil and the produced oil segments results from the segmented information note to the financial statements.

FINANCIAL REVIEW

Our sales volumes of produced oil of 22,129 bopd and operating netback of $61.44 per barrel resulted in funds flow from operations of $102.3 million ($1.21 per basic share) for the first quarter, a 16% decrease over the preceding quarter. The change in funds flow primarily relates to lower sales volumes and higher operating and transportation costs.

Capital expenditures in the first quarter were $81.9 million, representing a significant decrease from the fourth and first quarters of 2012. This reflects our plan to execute a more balanced capital program between development and exploration, along with drilling fewer high cost exploration wells in 2013.

We expanded our oil marketing business in Colombia as a result of the OCENSA pipeline restructuring effective February 1, 2013. For the remainder of the first quarter, we earned $3.3 million of operating cash flow through the purchase and re-sale of third party oil using un-used capacity on our pipeline assets.

We have engaged TD Securities Inc. as financial advisors for a formal process to pursue opportunities to monetize our pipeline assets. These assets consist of our 5% equity ownership position in OCENSA, our transportation rights of up to 28,750 bopd in the OCENSA pipeline, and our OBC investment consisting of a 9.65% equity position and 11,580 bopd of transportation capacity. We expect to complete this process in the third quarter.

OPERATIONAL REVIEW

Production

First quarter production averaged 22,063 bopd, 12% or 3,077 bopd lower than the fourth quarter mainly due to:

• Lower Deep Llanos production of 13% or 2,185 bopd, primarily due to natural declines;
• Lower Central Llanos production of 13% or 514 bopd primarily due to shut-in production as a result of workovers (435 bopd) combined with natural declines, partially offset by new production from the Mantis-3 well;
• Lower Orito production of 591 bopd primarily due to off-line production caused by pipeline disruptions, wells awaiting workovers and natural declines;
• Higher heavy oil average production of 246 bopd during the quarter from 46 days of testing our Tatama horizontal well at a rate of 465 bopd; and
• Brazil production of 36 bopd related to the Alvopetro acquisition that closed in December 2012.

Production averaged 21,230 bopd in April, representing a 3% increase over March primarily due to recovered production from wells that were offline or under service. Average April production does not include production from our recent Taya discovery.

Llanos Basin Heavy Oil Blocks (Rio Ariari, Chiguiro Oeste, Chiguiro Este), Colombia

In March, we recommenced our Tatama horizontal well production test with a higher fluid rate pump. The well initiated production testing on March 29^th for 39 days and averaged 633 bopd with a 90% water cut. To date, the well has cumulatively produced 51,000 barrels of oil from the Mirador Formation. This test demonstrated that heavy oil horizontal wells are capable of producing at commercial rates. We are planning to drill a second horizontal well in the Mochelo area to test the productivity of a more optimally designed horizontal well that should provide the basis for a first phase commercial development. We expect to have this well drilled and on production early in the quarter.

In addition, we are evaluating a third heavy oil horizontal oil well in our Rio Ariari-1 area. This would be a follow-up to our previously tested Rio Ariari-1 well that produced an average of 130 barrels of oil per day over a 124-day period from a vertical well.

Deep Llanos Basin (Corcel, Guatiquia, South Block 31, and Canaguaro), Colombia

We made an oil discovery on our Corcel Block with our Taya-1 exploration well. Well logs indicate 42 feet of potential net oil pay in the Mirador formation and 31 feet in the Guadalupe formation. We production tested the secondary target, the Guadalupe formation, over six days and the well produced an average of 1,700 bopd of 15.5 degree API oil with a 17% water cut. This production test was conducted using an electric submersible pump, a fully open choke with a drawdown of 47%. We reduced the drawdown to 26% over the last 24 hours and the well averaged 777 bopd at a 42% water cut. We plan to continue testing the well to fully evaluate the Guadalupe formation. In addition to the Guadalupe potential, we plan to evaluate the primary target, the Mirador formation, in the second quarter. Based on this discovery, we commenced drilling Taya-2, a separate structure from Taya-1 that offers both Mirador and Guadalupe hydrocarbon potential.

For the remainder of 2013, we are planning to drill up to six additional wells in the area, consisting of Taya-2, a proved undeveloped location on our recently acquired Canaguaro Block, Canaguay-2, and four additional exploration wells.

As previously announced, our acquisition of an 87.5% interest in the Canaguaro Block is strategic for a number of reasons, including accretive transaction metrics of $24.57 per barrel of proved plus probable reserves, the addition of 2.3 million barrels of proved plus probable reserves, over 400 bopd of additional production and providing a contiguous area of underexplored land located adjacent to our Blocks 25 and 31. We believe the Canaguaro Block is on the same fault trend as other oil fields to the south of the block, including the Balay discovery and our Corcel and Guatiquia discoveries.

Central Llanos Basin (Casimena, Castor, Casanare Este, Mapache Blocks), Colombia

During the quarter we drilled two wells, Mantis-3 and Zaino-1. Mantis-3 is a vertical development well targeting the upper Mirador formation. The well was placed on production in late March and since then has produced at an average rate of 347 bopd. In addition, we drilled the Zaino prospect on our Casimena Block and based on drilling results, we abandoned the well.

In April, we drilled our Curito-1 prospect on our Casanare Este Block. Well logs indicate 54 feet of potential net oil pay in four different formations, the C7, Mirador, Gacheta and Ubaque. We plan to production test each interval during the second quarter and with success, drill follow up appraisal wells.

We are currently drilling our Mantis-4 step-out well to test a southwest extension to the Mantis oil field in both the Upper and Lower Mirador formations. With success at Mantis-4, several additional development locations could be added targeting both the Upper and Lower Mirador formations. Following Mantis-4, we plan to drill Mantis-5, an in-fill location targeting the Upper Mirador formation.

Orito (Putumayo Basin), Colombia

We recommenced our Orito development drilling program in December 2012 and have drilled three wells to date, Orito-196, 197 and Orito-Norte. We targeted the Villeta Formation in Orito-196, and based on our petrophysical interpretation we have calculated the presence of a similar pay to the one encountered in Orito-193. We expect to have Orito-196 on production by mid-May, and both Orito 197 and Orito-Norte on production in June.

Brazil

In December 2012, we expanded our presence in the Recôncavo Basin, onshore Brazil by acquiring a 75% interest in Alvopetro Oil and Gas Investments Inc. ("Alvopetro"). The primary target on our Brazilian acreage is the Gomo member, which is both the mature source rock and contains the prospective reservoir sands. On our acreage, the Gomo is oil saturated and found at depths between 2,500 and 3,200 metres. There have been 24 wells drilled by other operators that have identified thick, stacked, oil-bearing sands. The Gomo net pay on these blocks ranges between 25 and 100 metres, averaging 44 metres with porosities ranging from 9 to 15 percent and permeability between 0.1 and 4 millidarcies. Oil quality ranges between 34 and 38 degrees API.

To further complement our Brazilian portfolio, we recently agreed to acquire interests in two additional blocks in the Recôncavo Basin: Blocks 170 and 183. Both blocks are contiguous with our existing acreage and offer the same tight-oil potential on trend with the Gomo member of the Candeias Formation.

We entered into farm-in agreement on Block 170 to acquire a 50 percent economic interest in the shallow zones (to the base of the Caruacu member of the Maracangalha Formation, approximately 2,100 metres) and a 90 percent economic interest in the deep zones of Block 170. As consideration for this acquisition, we will: (1) invest US$0.7 million in well equipment; (2) carry the farmor for 100 percent of the drilling of one exploration well; and (3) pay 50 percent of a 5 percent royalty to a third party previous owner. In addition, should the farmor elect not to participate in the second required commitment well, the farmor forfeits its entire remaining interest in the block to Alvopetro S.A. The transfer is subject to approval by Brazil's National Agency of Petroleum, Natural Gas and Biofuels (the "ANP"). In addition, we acquired a 100 percent working interest on Block 183 for approximately US$0.8 million, subject to approval by the ANP.

Including the acquisition of Block 170 and Block 183, Petrominerales holds an indirect interest in 10 blocks covering over 57,859 acres and has secured the majority of the high potential Deep Gomo play fairway in the Recôncavo Basin, onshore Brazil.

We plan to drill up to two exploration wells in 2013 and recomplete one well. Our vision is to implement a large-scale, repeatable, low-risk, multi-well development program in Brazil, utilizing advanced technology and completion techniques. We are excited about our entry into Brazil with this large resource opportunity.

OUTLOOK

For the remainder of 2013, we plan to drill up to 25 wells, balanced between development drilling opportunities and high-impact exploration in Colombia, Perú and Brazil. Our plan includes:

• Continuing development drilling programs at our Orito and Neiva blocks, drilling up to five more wells at Orito and up to six wells at Neiva;
• Drilling up to four wells on our Central Llanos acreage focusing on appraisal and development wells at our Yenac / Mantis oil fields and our potential new discovery at Curito;
• Drilling up to 6 exploration wells in Llanos Basin of Colombia targeting light oil resources of up to 44 million barrels of undiscovered petroleum initially-in-place;
• Positioning ourselves to quickly develop a commercial production platform on our heavy oil acreage based on the outcome of our Tatama test results;
• Drilling our first two wells in Brazil targeting a large, tight oil resource on our newly acquired lands;
• Exposure to the first of two high-impact exploration prospects to be drilled by our joint venture partner in Perú at no cost to Petrominerales as we are carried on the cost of these wells by our joint venture partner; and
• Commenced a formal process to pursue opportunities to monetize our pipeline assets.

We look forward to updating our shareholders on our progress throughout 2013.

ANNUAL AND SPECIAL MEETING

Petrominerales will be holding its Annual Special Meeting of Shareholders on Thursday, May 9, 2013 at 3:00 p.m. (Mountain Time) (5:00 p.m. Eastern Time) at the Calgary Petroleum Club, Devonian Room, located at 319 - 5^th Avenue SW, Calgary, Alberta, Canada. The meeting and a corporate presentation following the formal business of the meeting will also be webcast live and can be accessed using the following web address:
http://events.digitalmedia.telus.com/petrominerales/050913/index.php

Petrominerales Ltd. is an international oil and gas company operating in Latin America since 2002. Our high-quality land base and multi-year inventory of exploration and development opportunities in Colombia, Perú and Brazil provide long-term growth potential for years to come.

Non-IFRS Measures. This press release contains financial terms that are not considered measures under International Financial Reporting Standards ("IFRS"), such as funds flow from operations, adjusted net income, funds flow per share, adjusted net income per share, working capital, operating netback and free cash flow. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. We evaluate our performance and that of our business segments based on funds flow from operations and adjusted net income. Funds flow from operations is a non-IFRS term that represents cash generated from operating activities before changes in non-cash working capital. Adjusted net income is determined by adding back any losses or deducting any gains on the derivative liabilities and effects of the buyback of the convertible debentures (accelerated accretion and gain on settlement). Management considers funds flow from operations, funds flow per share, adjusted net income and adjusted net income per share important as they help evaluate performance and demonstrate the Company's ability to generate sufficient cash to fund future growth opportunities and repay debt. Working capital includes current assets less current liabilities and is used to evaluate the Company's short-term financial leverage. Operating netback is determined by dividing oil revenue less royalties, transportation and production expenses by sales volume of produced oil. Free cash flow is determined by deducting capital expenditures from E&E and D&P from funds flow from operations. Management considers operating netback important as it is a measure of profitability per barrel sold and reflects the quality of production. Funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, working capital, operating netbacks and free cash flow may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations, net income or other measures of financial performance calculated in accordance with IFRS.

Forward-Looking Statements and Cautionary Language. Certain information provided in this press release constitutes forward‐looking statements. Specifically, this press release contains forward‐looking statements relating to the Company's future exploration and development activities and the timing for bringing wells on production. The forward‐looking statements are based on certain key expectations and assumptions, including expectations and assumptions concerning the availability of capital, the success of future drilling and development activities, the performance of existing wells, the testing and performance of new wells, prevailing commodity prices and economic conditions, the availability of labour and services, the ability to transport and market our production, timing of completion of infrastructure and transportation projects, weather and access to drilling locations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the test results and performance of exploration and development drilling, recompletions and related activities; timing and rig availability; availability of transportation and offloading capacity, outcome of exploration contract negotiations; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrominerales that actual results achieved during the forecast period will be the same in whole or in part as those forecast; and there is no representation by Petrominerales that the test results of any new exploration well or development well is necessarily indicative of long-term performance or ultimate recovery. Except as may be required by applicable securities laws, Petrominerales assumes no obligation to publicly update or revise any forward‐looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

Undiscovered Petroleum Initially-In-Place ("UPIIP"). UPIIP, equivalent to undiscovered resources, are those quantities of petroleum that are estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of UPIIP is referred to as prospective resources, the remainder as unrecoverable. Undiscovered resources carry discovery risk. There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. A recovery project cannot be defined for this volume of UPIIP at this time.