Operations Update

On November 30, 2010 we placed our Corvina oil field into commercial production. This entailed the installation and commissioning of the gas injection compressor on the Corvina platform. We now operate at Corvina without flaring associated gas. To date, the compressor has met or exceeded our expectations for operating efficiency. We were able to continue to operate and produce from the Albacora A-14XD during the entire year 2010 under extended well testing permit, but on January 24, 2011 the well was shut in as the testing permit expired.  

During the fourth quarter 2010, we reached agreement with another operator to use the Petrex 18 drilling rig which had been working on our Albacora platform. The rig will be available for our use again near year end 2011. In addition, we have reached agreements to charter to that same operator our BPZ02 barge that supports the Petrex 18 drilling rig, as well as the Don Fernando construction barge.

During December 2010 we initiated formal front end engineering and design (FEED) work for the new Corvina CX-15 platform that is planned to have 24 drilling slots and to be constructed and installed in the Corvina field to continue the development of our proved and probable reserves in 2012.

Manolo Zuniga, President and Chief Executive Officer stated

 "The Company ended the year on a positive note as the Corvina field was placed into commercial production and our reserves estimates came in strong, with a 4% year on year increase to 38.9 million barrels. In addition during the fourth quarter 2010, we averaged 4,500 barrels per day of total oil production from Corvina and Albacora. We maintain our 4,000 barrels per day guidance for 2011 production based on the anticipated workovers in Corvina beginning in the second quarter in order to improve production in some of the original wells and the installation of the permanent production and injection facilities on the Albacora platform by year end."  Mr. Zuniga continued "Related to the process aimed at securing the permit to acquire the offshore 3-D seismic in Block Z-1, the public audiences were completed in early 2011 and we remain optimistic about obtaining the required permit by mid-year. In January of this year we closed on a $40 million credit agreement with Credit Suisse and we are in the process of exploring the availability of other credit facilities now that Corvina is in commercial production."  Mr. Zuniga concluded "Our 2011 capital expenditure program of $50 million primarily for the design and construction of an additional production platform for the Corvina oil field and for injection equipment to be installed on the platform in the Albacora oil field remains on track. In addition to capital expenditures, we plan to spend approximately $18 million on seismic acquisition in Block Z-1 and $4 million to complete the seismic acquisition programs in Blocks XXII and XXIII. All of this continues our goal of growing and strengthening the Company and our existing asset base by positioning us to resume and/or initiate drilling operations in our various blocks."

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