Petrominerales Reports First Quarter Financial Results Highlighted by Funds Flow from Operations of $200 Million

CALGARY, ALBERTA--(Marketwire - May 9, 2012) - Petrominerales Ltd. ("Petrominerales" or the "Company") (TSX:PMG.TO - News) (BVC:PMGC) is pleased to announce our 2012 first quarter financial results highlighted by operating netbacks of US$79.74 per barrel, reflecting strong world crude oil prices and synergistic value from our strategic OCENSA pipeline acquisition. Our high operating netbacks generated funds flow from operations of US$199.8 million or US$2.01 per share with average production of 34,047 barrels of oil per day ("bopd"). Our balance sheet remains strong with $175.6 million of cash and a completely undrawn, secured credit facility. This financial flexibility gives us the strength to execute our 2012 high-impact exploration program.

FINANCIAL & OPERATING HIGHLIGHTS

The following table provides a summary of Petrominerales' financial and operating results for the first quarter ended March 31, 2012 and 2011. Consolidated financial statements with Management's Discussion and Analysis ("MD&A") are now available on the Company's website at www.petrominerales.com and will also be available on the SEDAR website at www.sedar.com.

Financial Highlights

($ millions, except where noted)

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Three months ended March 31, 2012 2011 % change
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Oil sales 333.0 349.7 (5)
Funds flow from operations (1) 199.8 181.8 10
Per share - basic ($) 2.01 1.76 14
- diluted ($) 1.73 1.50 15
Adjusted net income (1) (2) 80.3 75.8 6
Per share - basic ($) 0.81 0.73 11
- diluted ($) 0.75 0.68 10
Dividends declared 12.5 13.4 (7)
Expenditures on PP&E and E&E(3) 218.4 149.5 46
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March 31, December 31,
As at, 2012 2011 % change
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Net working capital surplus(1) 36.2 73.8 (51)
Debt(5) 550.0 550.0 -
Total assets 2,283.2 2,226.5 3
Common shares, end of period (000s) 99,719 99,375 -
Fully diluted common shares, end of
period (000s)(4) 106,924 106,883 -
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Operating Highlights
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Three months ended March 31, 2012 2011 % change
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Production (bopd)
Deep Llanos 23,596 30,766 (23)
Central Llanos 4,416 3,966 11
Neiva 3,746 4,121 (9)
Orito 2,226 1,949 14
Heavy Oil 63 - -
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Total production 34,047 40,802 (17)
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Sales volumes 32,813 39,688 (17)
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Operating netback ($/bbl) (1)
WTI benchmark price 102.93 94.61 9
Brent benchmark price 118.49 104.89 13
Discount to Brent 6.97 6.99 -
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Sales price 111.52 97.90 14
Transportation expenses 6.83 9.36 (27)
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Realized crude oil price 104.69 88.54 18
Royalties 11.72 11.50 2
Production expenses 13.23 7.70 72
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Operating netback (1) 79.74 69.34 15
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(1) Non-IFRS measure. See "Non-IFRS Measures" section within this press
release.
(2) Net income has been adjusted for the IFRS accounting effects of changes
in the derivative financial liability. For the three months ended March
31, 2012 adjusted net income includes a $0.3 million reduction (March
31, 2011 - $39.0 million increase). Management considers adjusted net
income a better measure of the Company's economic performance.
(3) 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.
(4) Consists of the sum of common shares, stock options, deferred common
shares, incentive shares and potential shares issuable on conversion of
in-the-money convertible debentures outstanding as at the period-end
date. At March 31, 2012 and December 31, 2011, the convertible
debentures were considered debt since the bond conversion price of
$33.76 was higher than the Company's stock price.
(5) Debt represents the principal amount of convertible bonds outstanding.

HIGHLIGHTS AND SIGNIFICANT TRANSACTIONS DURING THE FIRST QUARTER

(Comparisons are first quarter 2012 compared to the first quarter of 2011 unless otherwise noted)

-- Our operating netbacks increased to $79.74 per barrel in the first
quarter, a 15 percent increase over the first quarter of 2011, primarily
due to higher world oil prices and savings achieved from our OCENSA
pipeline acquisition. Compared to the fourth quarter of 2011, operating
netbacks increased 10 percent, largely due to higher world oil prices.
-- We had two new oil discoveries; Tucuso on our Mapache Block and Chilaco
on our Corcel Block.
-- Funds flow from operations was $199.8 million or $2.01 per basic share,
representing ten and 14 percent increases over 2011.
-- Adjusted net income was $80.3 million or $0.81 per basic share,
representing six and 11 percent increases over 2011.

OPERATIONAL REVIEW

Production (bopd)

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April First Quarter Fourth Quarter
2012 2012 2011
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Deep Llanos 20,248 23,596 26,237
Central Llanos 5,255 4,416 3,226
Neiva 3,462 3,746 3,993
Orito 1,857 2,226 1,897
Heavy oil 14 63 -
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Total production 30,836 34,047 35,353
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Production averaged 30,836 bopd during April, nine percent or 3,214 bopd lower than the first quarter primarily due to our Yatay-1 well off-line for nine days in April for a pump replacement. May production to-date has averaged 33,103 bopd and reflects additions in late April at Yenac-4 and Chilaco-1, which is partially offset by approximately 750 bopd of production that was temporarily off-line due to community disturbances in the Central Llanos and is expected to be back on-line in the next few days.

First quarter production averaged 34,047 bopd, 1,306 bopd or 4 percent lower than the fourth quarter of 2011. Our Deep Llanos production decreased 2,641 bopd or 10 percent mainly due to natural declines, offset partially by our Yatay-2 development well that was brought on production in mid-January. Our Central Llanos production increased 1,190 bopd or 37 percent due to the addition of Yenac-5 in February and our Tucuso-1 discovery well in mid-March.

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

During the quarter, we drilled four wells (Yatay-2, Iboga-1, Tente-1 and Chilaco-1). We also drilled five Corcel water disposal wells (ASWD-3, CSWD-2, CSWD-3, DSWD-1 and DSWD-2).

On our Guatiquia Block, the Yatay-2 well was drilled to a total measured depth of 11,960 feet on January 1st. The well targeted by-passed pay in the Guadalupe formation encountered in the original discovery well. The well was placed on production in late January and averaged 519 bopd for the remainder of the quarter.

On Block 31, the Iboga-1 well concluded our initial exploration drilling program on the southern portion of Block 31. In the final test of a Lower Sand 2 interval, the well tested uneconomic quantities of 23 degree API oil.

In January 2012, we mobilized two drilling rigs to our Corcel Block executing a multi-well drilling program. We drilled our Tente-1 well to a total measured depth of 14,605 feet on February 28th. Well logs indicate 21 feet of potential net oil pay in the Guadalupe and Lower Sand 1 formations. We cased the well as a potential oil producer and, in early May, we commenced a three interval testing program. Also during the quarter, we drilled our Chilaco-1 well to a total measured depth of 12,360 feet on March 18th. Well logs indicate 24 feet of potential net oil pay in the Lower Sand Formations. We cased the well and placed it on production at the end of April at 437 bopd with a 45 percent water cut. The rig is now moving to drill our Hungaro location on the Corcel Block.

On March 31st we began to drill our Guala-1 prospect reaching 12,432 feet measured depth on May 3rd. Well logs indicate 47 feet of potential net oil pay primarily in the Lower Sand 1 formation and we are casing the well as a potential oil producer. Following Guala-1, we plan to move the rig to drill our Lapa prospect on the Corcel Block.

Foothills Blocks (Block 25, 31, 59 and 15), Deep Llanos Basin, Colombia

In January, we had drilled our Bromelia-1 prospect to 16,919 feet when, during an operation to remove the bottom-hole assembly from the well, the drill pipe parted resulting in a blockage of the well bore. As a result, we side-tracked the well at 12,000 feet. On April 26, 2012, we successfully cased the well at our third intermediate casing point of 18,015 feet measured depth after penetrating the Carbonera, Mirador, Guadalupe and Barco formations. While drilling the initial 18,015 feet of the well, we encountered an initial 204 feet of net potential reservoir. We have initially identified 40 feet of potential net hydrocarbon pay and we do not have a complete data set over the remaining 164 feet of reservoir due to logging tool failures. Hydrocarbon shows, from geological description and or mud gas analysis, were encountered in the Carbonera C8, Mirador, Guadalupe and Barco formations. We believe that the thickness of reservoir-quality intervals encountered at these drilling depths is very encouraging for the prospectivity of the Block. After resuming drilling operations, we penetrated the Une formation that exhibited strong indications of high pressure gas in a 30 foot interval. The well reached targeted depth of 18,550 feet on May 9th and we plan to case the well and acquire a complete set of cased-hole logs that will help analyze the remaining 164 feet of reservoir initially identified and in addition obtain data over the last 535 feet recently drilled. Following the log analysis, we plan to conduct a multi-zone program.

Following Bromelia-1, we plan to drill our second exploration prospect on Block 25, Canatua-1. We also have initiated a further 256 square kilometre 3D seismic acquisition program on the northern portion of Block 25. The 3D seismic, combined with our well results, will help to significantly improve our geological and geophysical understanding of the area.

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

In the first quarter, we drilled two exploration wells (Tucuso-1 and Cerillo-2) on our Mapache and Casanare Este Blocks, and one appraisal well (Yenac-5) on our Casimena Block. In April 2012, we drilled an additional appraisal well on our Casimena Block, Yenac-4.

On our Mapache Block, we drilled the Tucuso prospect to 7,391 feet measured depth on February 6th. The well is located 20 kilometres southeast from our Disa oil discovery. Well logs indicated net hydrocarbon pay of 38 feet in four intervals, including 26 net feet in the Ubaque Formation. The well was placed on production March 15th and averaged 1,106 bopd over the remainder of the month.

On our Casanare Este Block, we drilled the Cerillo-2 prospect to 9,400 feet measured depth on March 24th. The well is located 20 kilometres southeast from our first Cerillo oil discovery drilled in 2010. We cased the well and plan to complete a testing program early in the third quarter, when weather conditions are expected to be dryer and allow consistent access to the well.

We drilled our Yenac-5 appraisal well to a total measured depth of 7,834 feet on January 13th. Well logs indicated 58 feet of net pay, 35 feet in the Upper Mirador formation and 23 feet in the Lower Mirador formation. Yenac-5 penetrated the top of the Mirador formation 10 feet structurally higher than in Yenac-3. We placed Yenac-5 on production on January 31st and the well averaged 1,773 bopd of 16 degree API during the remainder of the quarter.

Following Yenac-5, we drilled our Yenac-4 appraisal well. Well logs indicated 55 feet of net pay, 36 feet in the Upper Mirador formation and 19 feet in the Lower Mirador formation. We placed Yenac-4 on production in late April at over 1,000 bopd of 16 degree API.

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

In 2011, we drilled our first horizontal well, Tatama-1, near our Mochelo discovery on our Rio Ariari Block. The well was drilled to a total measured depth of 6,550 feet including a 1,000 foot horizontal section. Early in 2012, the well was completed with 96 feet of blank pipe and 889 feet of screens (Meshrite(TM)). During our initial tests, the productivity of the well was significantly lower than that encountered in our original Mochelo-1 vertical discovery well. We pulled the liner and re-initiated a multi-rate production test, resulting in oil rates up to 250 bopd at water cuts ranging from 75 to 90 percent. Over 37 days of testing, the well produced an average of 107 bopd at a 79 percent water cut. Based on the Mochelo vertical well productivity, the horizontal well productivity was still lower than we expected. We then ran a slotted liner and production logs into the well to determine which portions of the well bore are contributing to production. Based on our analysis of the initial production log data, we believe there is fluid inflow coming from the entire length of the horizontal section. We plan to place the well on a long-term production test while running a coiled tubing string to inject diluent down-hole to maximize the oil production from the well. The drilling rig is currently moving to our Dara-1 prospect on our Chiguiro Oeste Block.

We also drilled four stratigraphic wells (ES-22A, ES-36, ES-42 and ES-42A) in the quarter. The ES-42A well, which encountered 37 feet of potential pay in the lower Mirador formation, confirming a new play concept developed from the interpretation of our 3D seismic. Subsequent to March 31st, we drilled ES-44 which encountered 31 feet of potential net oil pay. We have now drilled a total of 11 stratigraphic wells and on average we have encountered 21 feet of potential net oil pay and in three wells the net pay exceeded 30 feet.

The rig is currently drilling our next well, ES-45, and we plan to drill up to seven more stratigraphic wells targeting new play concepts to identify and quantify the heavy oil potential of our Rio Ariari Block. Following completion of our stratigraphic drilling program, we plan to select a location for our next conventional horizontal heavy oil well.

Orito, Putumayo Basin, Colombia

In January 2012, we place the Orito-193 well on production at over 800 bopd of 26 degree API oil in the Villeta Formation, the secondary reservoir target in the field. Based on the Orito-193 result, we identified six existing wells that can be re-completed for production in the Villeta Formation. We plan to finish the six-well recompletion program in the third quarter of 2012. In the fourth quarter of 2011, we suspended our drilling program on the Block pending the receipt of new environment permits. We expect to recommence our development drilling program early in 2013.

Neiva, Upper Magdalena Basin, Colombia

Late in the third quarter, we suspended our drilling program on the Block pending the receipt of new environment permits. We expect to receive new permits in 2013, at which time we plan to recommence our development drilling program.

Block 126, Peru

The testing of the La Colpa 2X well was completed in April 2012 and non-commercial volumes of hydrocarbon were encountered. Log analysis and sample evaluation had suggested potential for hydrocarbons in several zones; namely the presence of 18 feet of net potential oil pay in the Tarma sandstone and 72 feet of net potential oil pay in three intervals of the Copacabana reservoir in several porous carbonate intervals. Despite encountering oil and gas shows in the samples while drilling, it appears the entire Copacabana section has been flushed with fresh water leaving only residual hydrocarbon saturations. Unusually low salinities in the formation waters complicated log analysis as fresh water generates a similar high resistivity log signature to that of hydrocarbons. It is encouraging that these Copacabana limestone reservoirs demonstrated excellent deliverability, with flow rates of up to almost 4,000 barrels of fluid per day.

Following La Colpa 2X, we plan to move equipment to drill our Sheshea-1X prospect on the Block. The Sheshea prospect is an independent prospect and a different play-type from La Colpa. We are also targeting multiple reservoir formations in Sheshea. We expect to begin drilling operations from this well in July, subject to weather conditions.

Blocks 114 and 131, Peru

Petrominerales holds a 30 percent working interest in Blocks 114 and 131. On Block 131, the operator has identified two drillable prospects. The Environmental Impact Assessment ("EIA") for drilling was submitted in June 2011 and the first well is planned April 2013. On Block 114, the next exploration phase includes the acquisition of 325 kilometres of 2D seismic by July 2013. To date, four drillable prospects and six leads have been identified on this Block. The operator applied for and was granted force majeure status over the block in December 2011 due to unusually high river levels and heavy rainfall which has flooded out a portion of this block making seismic acquisition impossible. The river levels have subsided and the block is now out of force majeure and we expect the seismic program to recommence in June. The operator is responsible for our share of the costs under the current seismic exploration phase, as well as our share of costs for the first exploration well on each block.

Block 161 and 141, Peru

Block 161, situated in east central Peru, is 1.2 million acres in size and Petrominerales has an 80 percent working interest. We submitted an EIA that covers our planned 353 kilometre 2D seismic program and we are waiting on the ministry of environment's approval. We are also awaiting feedback on our first round of community workshops. Block 141, situated in southern Peru, is 1.3 million acres in size and Petrominerales has an 80 percent working interest. Currently, the Block is in force majeure due to new government regulations requiring additional community consultations. As a result, our current commitment to complete a 300 kilometre 2D seismic program by July 2012 has been suspended pending completion of these additional consultations.

OUTLOOK

Our long-term objective is to focus on delivering high-impact exploration success, building net asset value, and generating attractive total returns for shareholders through the following strategies:

-- Material growth in reserves through the execution of a balanced,
diversified exploration drilling program;
-- Maintain a multi-year drilling inventory of exploration prospects by
continually adding to our land position and acquiring high quality 3D
seismic over those lands, in 2012 we plan to acquire over 1,000 square
kilometres of new 3D seismic data;
-- Explore for and develop large heavy oil resource accumulations;
-- Rapidly convert new discoveries into production and cash flow;
-- Demonstrate leadership in oil and gas exploration, deployment and
development of technology, a Company-wide focus on innovation, constant
regard for the health and safety of our employees, emphasis on industry
leading environmental performance and ongoing, meaningful dialogue with
our stakeholders;
-- Internally fund our growth through cash flow generation from our
established assets; and
-- Provide a dividend yield to investors.

Our production base continues to generate significant cash flows, $200 million in the first quarter, and our strong balance sheet includes cash on hand of $176 million and a completely undrawn, secured credit facility. Our immediate focus is on executing our high-impact exploration drilling programs in Colombia and Peru. In addition, we are acquiring over 1,000 square kilometres of new 3D seismic that we expect will add significantly to our prospect inventory and provide new drilling opportunities for our 2013 program. We are very encouraged by our early results on our first foothills well, Bromelia, and our Guala well on the Corcel Block and look forward to updating our shareholders on our progress through 2012.

ANNUAL GENERAL MEETING

Our annual meeting of shareholders will be held May 10, 2012, at 10:00 a.m. Bogota time (9:00 a.m. Calgary time, 11:00 a.m. Eastern Time) at the Radisson Royal Bogota Hotel, Millennium Room, Calle 113 No. 7 - 65, Bogota, Colombia. For those unable to attend in person, the meeting and a comprehensive corporate presentation following the meeting will be webcast live and can be accessed using the following web address:

http://envivo.videoteca.com.co/petrominerales/12052012/

Petrominerales Ltd. is an international oil and gas company operating in Latin America since 2002. Today, Petrominerales is the most active exploration company and the fourth largest oil producer in Colombia. Our high quality land base and multi-year inventory of exploration opportunities provides long-term growth potential for years to come.

Forward-Looking Statements. 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 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 results 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. 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.

Contacts

Corey C. Ruttan
Petrominerales Ltd.
President and Chief Executive Officer
403.920.0124 or 011.571.629.2701

Jack F. Scott
Petrominerales Ltd.
Chief Operating Officer
403.920.0124 or 011.571.629.2701

Kelly D. Sledz
Petrominerales Ltd.
Chief Financial Officer
403.920.0124 or 011.571.629.2701