PMG closes on pipeline acquisition

[dan_s]

PMG has a lot of upside for us. Hang tough with this one as 2nd quarter results will be solid and production is ramping up.

BOGOTA, COLOMBIA--(Marketwire - July 20, 2011) - Petrominerales Ltd. ("Petrominerales" or the "Company") (TSX:PMG - News) is pleased to announce that we, through a wholly-owned subsidiary, have closed our previously announced acquisition of a five percent interest in the Oleoducto Central S.A. ("Ocensa") crude oil pipeline from Total E&P Holdings, for a purchase price of US$281 million.

The 830 kilometre Ocensa pipeline starts onshore at the Cusiana and Cupiagua fields and terminates at the port in Covenas on the Caribbean coast of Colombia (Giving PMG access to the higher Gulf Coast oil prices). The Ocensa pipeline is presently running at capacity, transporting approximately 560,000 barrels of oil per day ("bopd") from the Llanos Basin, representing sixty percent of the current total oil production in Colombia.

Petrominerales expects to transport crude oil through the Ocensa pipeline commencing September 1, 2011, providing us with strategic access to transportation infrastructure. This acquisition is expected to lower our transportation costs compared to trucking for a significant portion of our Llanos basin production, especially in the near term given the limited existing transportation infrastructure in Colombia. In addition, increasing the volume of our oil transported by pipeline reduces risks associated with trucking oil and our exposure to escalating trucking costs.

The expansion of our infrastructure base through this acquisition enhances our marketing flexibility by improving our access to international crude oil markets and pricing, having the potential to further strengthen our netbacks. Along with our 9.65% interest in the Bicentenario pipeline (OBC), this acquisition supports our long-term corporate objectives by securing strategic transportation capacity for our growing base of production, including our heavy oil opportunities. The acquisition of an interest in Ocensa aligns with Petrominerales' corporate objective of continuing to be Colombthe highest netback producer in Columbia.

[dan_s]

This is a very important deal for PMG. I gives them firm transportation and access to a better market for their oil. It also reduces trucking expense, increasing their netbacks.