Company Update

Petrominerales: 2012 guidance

BUY
Petrominerales
11 January 2012 Natalia Agudelo nap@celfin.com +574 320 4103 Cesar Perez-Novoa cp@celfin.com +562 490 5012

Oil & Gas | Colombia

Intensive exploration program

On Monday (Jan. 9) Petrominerales (PMG) published its 2012 outlook and guidance, and 4Q11 operational update. Average daily production in December was 36,041 barrels of oil per day (bopd), up 5% from 34,193 bopd in November. This brought 4Q11 daily average production to 35,377 bopd, in line with our forecast of 35,909 bopd which we had adjusted based on PMGs 2H11 output, and the limitations the company experienced due to water handling, and was thus lower than our initial expectation. December production included additions from the Cobra-2 well, initially at 4,000 bopd; this well is currently producing 1,900 bopd, at a 64 percent water cut the water cut has been stabilized and the company thinks output should be around 1,900 bopd.
18.78 43.44 BUY 99,339,479 1,865 PMG CN

Overview
Price (CAD) PO (CAD) Rating Shares MCap (US$mn) Ticker CAD (BB) Forecast (US$) Revenue Ebitda Net income PE (x) EV/Ebitda (x) Source: Celfin Capital. 2012E 1,312 702 307 6.1 1.8

At the end of December PMG was able to add up 700 bopd from previously shut-in production levels (due to water handling restrictions) by implementing water disposal wells, but there is still currently production of as much as 2,500 bopd being repressed. The activity program announced for 2012 includes: 1. Drilling of 19 exploration wells: 16 in Colombia and 3 in Peru, targeting over 270 million barrels of STOOIP (Oil in place) on the companys conventional light oil exploration acreage.

2013E 1,235 648 230 8.3 1.6

Five of these 19 exploration wells target large prospects in the foothills region of the Llanos Basin (Block 59, Block 31 and Block 15), and on Block 126 in Peru where the company plans to drill up to a maximum of 3 wells in 2012. 2. Drilling of up to 24 stratigraphic wells on the heavy oil acreage being planned in the Rio Ariari field to obtain production results from at least two horizontal wells, to support a longer-term heavy oil strategy.
2 Acquiring over 700 km of new 3D seismic data on the Llanos Basin Foothills acreage to position the companys 2013 drilling program with new high impact drilling prospects.

3.

What to look for in 2012:

Additional water disposal facilities being added in 1Q12, thus lifting restrictions placed on PMGs production in 2H11, enabling lifting of as much as 2,500 bopd currently being shut-in.

(Next page:) Current drilling activity >>

Petrominerales | Oil & Gas 1

Petrominerales | Company Update

11 January 2012

Current drilling activity information

Deep llanos Basin: Iboga 1 well on Block 31: production tests in early January. Previous reports indicate a net pay of 42 feet in the Guadalupe and lower sands. Tente-1 well in the Corcel block: drilling began December 27; results are expected in March. Yatay-2 in Guaitiquia: production results expected in late January.

Foothill block Bromelia-1 well log results for February: this is an important development to look out for, due to its large potential for addition of reserves, and the possibility of its marking successful entry into the deep foothills area. After Bromelia, the company will drill Canatua-1 in Block 25, with results expected in 2Q12.

Central Llanos Basin Yenac-5: Production test shortly previous reports indicate 58 feet of net pay.

Llanos basin: Tamata-1 well production tests: at end of January. This is PMGs first horizontal well, and will be the type example for the wells used in the basin for increased recovery.

Petrominerales | Oil & Gas

Research Team & Disclaimer

Celfin Capital Equity Research

Chile Cesar Perez-Novoa Managing Director: Strategy & Economics +562 490 5012 cp@celfin.com Tomas Gonzalez Senior Analyst: Electric & Water Utilities, TMT +562 490 5034 tgb@celfin.com Alex Sadzawka Small Caps Analyst: Industrials +562 490 5448 asl@celfin.com Jeanne Marie Benoit Small Caps Analyst: Consumer +562 490 5304 jbg@celfin.com Peru Isabel Darrigrandi Senior Analyst: Metals & Mining +562 490 5093 ida@celfin.com Hedmond Rios Economist +562 713 4807 hrv@celfin.com Mario Arend Chief Economist +562 713 4903 mas@celfin.com Colombia Natalia Agudelo Senior Analyst: Energy & Utilities +574 320 4100 nap@celfin.com Jairo Agudelo Senior Analyst: Industrials & Consumer +574 320 4100 jar@celfin.com Ruben Arismendy Analyst: Metals & Mining Exploration +574 320 4100 ra@celfin.com Juan Camilo Dauder Economist / Senior Banks Analyst +574 320 4100 jds@celfin.com Andres Cardona Analyst: Industrials +574 320 4100 acg@celfin.com

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Petrominerales | Oil & Gas