Petroamerica Announces the Financial and Operating Results for the Three Months Ended March 31, 2014

CALGARY, May 29, 2014 /CNW/ - Petroamerica Oil Corp. (TSX-V: PTA) ("Petroamerica" or the "Company"), a Canadian oil and gas company operating in Colombia, is pleased to announce the financial and operating results for the three months ended March 31, 2014. Copies of the Company's Management Discussion and Analysis and Financial Statements have been filed with the Canadian Securities Regulatory Authorities and can be viewed or downloaded at the Company's website at www.petroamericaoilcorp.com or at www.sedar.com. The financial results for all periods presented are in United States dollars unless otherwise indicated.

Quarterly highlights include:

• Generated revenue of over $51.7 million, after royalties, leading to positive funds flow from operation of $26.6 million ($0.04 per share) with an operating netback of approximately US $64 per barrel;
• Achieved average daily production of 6,478 barrels of oil equivalent per day ("boepd"), exiting the quarter at daily production of 6,477 boepd;
• Closed the quarter with over $103 million in cash and short term investments, an increase of 55% from the close of 2013.

The following table presents the highlights of Petroamerica's financial and operating results.

First Quarter Financial Summary
For the three months ended March 31, 2014, the Company reported $51.7 million in revenue, net of royalties, from the sale of 601 Mboe. The realized sales price was $105.76 per boe generating an operating netback of approximately $64 per barrel.

For the first quarter of 2014, the Company's net income was $17.6 million ($0.03 per share diluted), due to the strong production levels through the quarter and continued strong oil prices. The Company's capital expenditures for the first quarter were $11.3 million, all invested in Colombia. These capital expenditures were funded from available cash on hand. As at December 31, 2013, the Company held 12 Mbbls of oil in inventory.

Operations Update

Company Production
March production averaged 6,506 boepd (Company working interest) compared to average production of 6,497 boepd for the previous month, setting a Company record for average monthly production.

Rumi (Non-operated, 40% Working Interest)
The long term test facility for the Rumi-1 exploration well, which was drilled in the fourth quarter of 2013, was initiated on April 24, 2014 but was temporarily halted shortly thereafter due to problems with the electro-submersible pump. Once this pump is replaced in early June, the test is expected to recommence. Future appraisal drilling on the Rumi structure will be contingent on the production performance during the long-term test.

Curiara (Non-operated, 25% Working Interest)
The Curiara long-term test facility was commissioned and the Curiara-1 well started producing on April 5, 2014 at rates of approximately 250 bopd of 42 degree API oil. This rate is temporary and restricted by authorized flaring of 1.5 million cubic feet per day of gas, while gas dehydration and gas compressors are commissioned. The results of this long-term test will determine the forward appraisal plans for this discovery.

Exploration, Appraisal and Development Drilling in 2014

A summary of exploration, appraisal and development drilling expected to take place over the near term is provided below:

Arrangement Agreement

On April 28, 2014 the Company entered into an arrangement agreement ("Arrangement Agreement") with Suroco Energy Inc. ("Suroco"), whereby the Company has agreed to acquire all of the issued and outstanding common shares of Suroco by way of a statutory plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). Under the terms of the Arrangement Agreement, holders of Suroco shares will receive 1.7627 common shares of the Company for each Suroco share held. It is anticipated that the Company will issue approximately 237 million Company shares in connection with the Arrangement. Completion of the Arrangement is subject to customary closing conditions, including a number of Suroco shareholder, court, government and regulatory approvals. The Arrangement will need to be approved by not less than two-thirds of the votes cast by the Suroco shareholders as well as a majority of votes cast by Suroco shareholders after excluding votes cast by shareholders who are excluded shareholders under applicable securities requirements at the Annual and Special meeting of Suroco Shareholders to be held at the end of June, 2014. The Arrangement is expected to close at or around June 30, 2014 provided all required approvals are obtained.

Suroco currently holds interests in five blocks in the Putumayo Basin of Colombia, produced an average of 2,461 bopd (net, before royalties) of medium crude oil for March 2014 and holds approximately 3.1 million barrels of proved and probable ("2P") reserves according to the GLJ reserves report dated December 31, 2013.

Outlook

On completion of Arrangement, the combined entity is expected to hold interests in eleven exploration and production contracts in the Llanos and Putumayo Basins of Colombia, covering over one million gross/500 thousand net acres, focusing on high netback light and medium oil. This portfolio will include a substantial inventory of exploration prospects and leads that will be pursued to support future production growth for the combined entity. Furthermore, the combined entity will also have significant exposure to the prolific N Sand play in the Putumayo Basin in addition to the current production operations, discoveries and exploration opportunities in the Llanos basin, enhancing the overall portfolio and diversifying the combined company's asset base. The combined 2P reserves, based on the reserves reports issued by both companies as at December 31, 2013, would total over 8 million boe, with a before tax net present value (discounted at 10%) of over $284 million. This does not include unbooked reserves not factored into the 2013 year end results that could be added in the near term as a result of recent drilling.

Production guidance for the Company alone for 2014 is currently estimated to average 6,000 boepd, an increase from the 5,000 to 5,500 boepd estimate that was provided earlier this year. Going forward, the Company will continue to monitor the overall production rates, and expects to provide regular updates to the expected production rates for the remainder of the year as well as provide production guidance for the combined entity once the Arrangement is completed.

Combined, the capital program for 2014 is projected to total $85.0 million, including a projected drilling program that includes 15 wells in the current year: 8 high impact exploration wells and 7 lower risk appraisal and development wells.

On completion of the Arrangement and providing for the revised production estimates and the resulting cash flows as well as the planned combined capital spending for the year, the Company expects to be able to fully fund internally its operations, both on a stand-alone and on a combined basis, for the year through the combination of free cash flow and cash on hand. However, the Company will continue to pursue new business opportunities to both enhance its current and projected land holdings to provide additional future growth.

Forward Looking Statements:

This news release includes information that constitutes "forward-looking information" or "forward-looking statements". More particularly, this news release contains statements concerning expectations regarding regulatory and partner approvals on the Company's development plan, drilling and operational opportunities and the timing associated therewith, test results and the timing thereof, the use of available cash on hand in addition to the potential exploration and development opportunities and expectations regarding regulatory approval and the overall strategic direction of the Company including the anticipated results from the completion of the Arrangement and the timing thereof. The forward-looking statements contained in this document, including expectations and assumptions concerning the obtaining of the necessary regulatory approvals, including ANH approval, and the assumptions, opinions and views of the Company or cited from third party sources, are solely opinions and forecasts which are uncertain and subject to risks. A multitude of factors can cause actual events to differ significantly from any anticipated developments and although the Company believes that the expectations represented by such forward-looking statements are reasonable, undue reliance should not be placed on the forward-looking statements because there can be no assurance that such expectations will be realized. Material risk factors include, but are not limited to: the inability to obtain regulatory approval, including ANH approval, for the transfer of participating interests and/or operatorship for the Company's properties, the inability to obtain shareholder approval for the Arrangement, the risks of the oil and gas industry in general, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable shortages of equipment and/or labour; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates, and reliance on industry partners.

Data obtained from the initial testing results at the referenced wells, which may include barrels of oil produced and levels of water-cut, should be considered to be preliminary until a further and detailed analysis or interpretation has been done on such data. The test results disclosed in this press release are not necessarily indicative of long-term performance or of ultimate recovery. The reader is cautioned not to unduly rely on such results as such results may not be indicative of future performance of the well or of expected production results for the Company in the future.

Neither the Company nor any of its subsidiaries nor any of its officers, directors or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does any of the foregoing accept any responsibility for the future accuracy of the opinions expressed in this document or the actual occurrence of the forecasted developments.

The forward-looking statements contained in this document are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

'boe' may be misleading if used in isolation. Throughout this press release the calculation of boe is at a conversion rate of 6,000 cubic feet of natural gas for one barrel of oil and is based on an energy conversion method at the burner tip and does not represent a value equivalence at the wellhead.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Petroamerica Oil Corp.