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17.12.09

Drilling and Production Update


PetroLatina Energy Plc
(“PetroLatina” or the “Company”)

Drilling and Production Update

PetroLatina (AIM: PELE), an independent oil and gas exploration, development and production company focused on Latin America, announces a drilling update in respect of the Los Angeles field, the current production run rate, an operational update on the Colon field and the spudding of the Zoe-1 exploration well.

Highlights:

• Two additional successful wells drilled in the Los Angeles field adding 350 barrels of oil per day (“bopd”) gross (112 bopd net) production, making a total of eight successful wells drilled by the Company in 2009.

• The Zoe-1 exploration well spudded on 3 December 2009 and is expected to reach its target depth of 10,600ft within approximately the next ten days.

• Current production run rate of 1,004 bopd net (2,162 bopd gross) versus average oil production of approximately 280 bopd net (787 bopd gross) in 2008.

Juan Carlos Rodriguez, Chief Executive of PetroLatina, said:

“The fourth quarter of 2009 has been another period of significant progress for PetroLatina. We drilled two further successful wells bringing the total for the year to date to eight, with a 100% success rate. We also spudded the Zoe-1 exploration well which could have a significant impact on the Company if it proves to be a discovery.

“With our net production run rate increasing markedly, we are also currently in the process of producing an updated reserves report which we expect to publish early next year.”


Los Angeles Field Development Drilling Update

Two additional wells, Los Angeles-15 and Los Angeles-16, have been successfully drilled in the Los Angeles field since the previous update released in September 2009. Both wells were directionally drilled from the existing and producing Los Angeles-12 surface location. This approach of drilling well clusters directionally from a single surface location is resulting in considerably reduced well costs in the short term and lower production costs in the longer term as a result of operational efficiencies gained.

Los Angeles-15 was drilled to a final total measured depth of 6,732ft TVD SS in a direction north-northeast of Los Angeles-12 and encountered the Lower Lisama oil pay zone at the prognosis depth of 5,649ft subsea. Log analysis of this section indicated that a total of 169ft of net oil pay was encountered in the target section. The well was perforated over the interval 6,070ft to 6,314ft measured depth and is now on production at a stable rate of 215 bopd.

Los Angeles-16 was drilled to a final total measured depth of 7,082ft TVD SS in a direction northwest of Los Angeles-12 and encountered the Lower Lisama oil pay zone at the prognosis depth of 5,850ft subsea. Log analysis of this section indicated that a total of 191ft of net oil pay was encountered in the target section. The well was perforated over the interval 6,007ft to 6,514ft measured depth and is now on production at a stable rate of 135 bopd.

The drilling of these additional Los Angeles wells brings the total number of successful wells drilled by the Company in 2009 to eight.

Los Angeles 12

The Los Angeles-12 well is currently on a long production test at an average production rate of 51 bopd. This well is on natural flow. It is noted that this well produces from the Umir formation which lies below the traditional Los Angeles Lower Lisama producing reservoir. Production from the Umir formation is deemed a “new discovery”, has more advantageous fiscal terms and produces oil of higher quality, 27 degrees API, versus 13 degrees API in the traditional producing sand. A well service programme is planned for the third week of December in order to install a rod pump in this well and thereby increase the production rate.

Colon Field Update

The Colon field continues to produce at a rate of 654 bopd from two wells, Colon-1 and Colon-2. These wells continue to produce on natural flow and the production has been declining in line with expectations. As previously reported the Umir sand, from which the oil production is derived in the Colon field, is a fine grained and over pressured sand and for that reason a relatively rapid initial decline rate was expected. An interference test was recently conducted between the Colon-1 and Colon-2 wells, which are situated approximately 450 metres apart, and this found that, although the wells are completed in the same sand, the production in one had not yet affected the other. This confirms that the development drilling programme planned for 2010 is appropriate and justified. The well performance has also confirmed the previous plan to install electric submersible pumps in the Colon wells within the next four months. Based on the well data collected to date and pump design calculations, it is currently expected that the addition of these pumps will approximately double the current Colon well production rates.

Chuira-1 Well Update

A workover of the Chuira-1 well has recently been attempted; however, this was not successful in removing the mechanical blockage previously reported to exist in the well. This well originally came on production at 180 bopd before dropping abruptly to 40 bopd after a few days. The two oil bearing units are in the Cretaceous La Luna limestone and, based on petrophysical and log analysis, are of better reservoir quality, in terms of porosity and permeability, than is commonly found in this part of the Middle Magdalena basin. It has been determined that mechanical problems have resulted in the total loss of the production of the Lower La Luna limestone and the partial loss of the production from the Upper La Luna limestone. Various options, including a sidetrack and multilateral wells, are now being reviewed both in-house and by third party specialists to establish the optimum means of bringing this discovery into full production. The oil currently being produced is of 21 degrees API.

Zoe-1 Exploration Well Status

The Zoe-1 exploration well, which was highlighted at the Company’s Annual General Meeting in June as being one of the key exploration wells planned for 2009, was spudded on 3 December. The well is currently drilling ahead at 6,500ft after the setting of surface casing at 318ft and intermediate casing at 2,189ft. The Zoe-1 well is being drilled approximately 1km to the east of, and based on the recently acquired 3D seismic, updip of the 1985 San Alberto 1 well. The San Alberto 1 well contains two zones which are interpreted, based on petrophysical analysis, to be oil bearing. The upper zone, the La Paz sand, produced at rates of up to 1,400 bopd of 19 degree API oil at PetroLatina’s Santa Lucia field located approximately 15km to the west of Zoe-1. The lower zone, the Lower Lisama sand, is productive at PetroLatina’s Los Angeles field about 60km to the north of Zoe-1, where it initially produced 13 degree API oil at rates of up to 350 bopd and continues to produce additional oil in new wells as noted above. As Zoe-1 is being drilled on a recently acquired block it falls under the 2004 Agencia Nacional de Hidrocarburos terms and, as such, qualifies for the low 8 per cent. royalty rate and does not incur a windfall profits tax until 5 million barrels of oil have been produced. The Company holds an 85 per cent. interest in the Zoe-1 prospect.

Santa Lucia Field Drilling Plans

Following the completion of the Zoe-1 well the Latco-1 drilling rig will be moved to the Company operated Santa Lucia field for a planned development drilling campaign. This rig has now been fitted with a modern top drive system and an “iron roughneck” and its performance is proving to be highly efficient. Petrophysical studies conducted by both the Company and a third party specialist (Schlumberger) have shown that a number of undrained oil bearing sands exist in the Santa Lucia field in addition to the ones which have been perforated and have produced to date. Individual wells in the field, specifically Santa Lucia 2, have produced as much as 1.4 million barrels to date and continue to produce at a rate of 150 bopd from the La Paz formation. In addition, the Umir formation, which is productive at PetroLatina’s Colon field to the south and which has produced 177 bopd of 17.5 degree API oil on test in Santa Lucia-1, has never been commercially produced in the Santa Lucia field. It is thought likely, on that basis, that considerable upside remains to be developed and produced in this field.

Serafin gas well

A contract to construct a ‘city gate’ gas handling station to connect the Serafin-1 gas well to the main Colombian gas trunk line is expected to be signed in early 2010. This will hook up the Serafin well to the Ballenas-Barrancabermeja gas trunk line which carries the bulk of Colombia’s gas production from the Caribbean coast to the gas consuming cities in the centre of the country. The construction project is expected to take six months to complete.

Enquiries:

PetroLatina Energy Plc
Juan Carlos Rodriguez, Chief Executive Officer
Tel: +57 1627 8435
Pawan Sharma, Executive Vice President - Corporate Affairs Tel: +44 (0)207 766 0081

Strand Hanson Limited
Simon Raggett / Matthew Chandler Tel: +44 (0)20 7409 3494

Financial Dynamics
Ben Brewerton / Susan Quigley Tel: +44 (0)20 7831 3113

Mr Menno Wiebe, a Non-executive director of the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Mr Wiebe is a Petroleum Geologist and has been a Member of the American Association of Petroleum Geologists for more than 25 years and a Member of the Geological Society for more than 5 years.

Additional Information on PetroLatina Energy Plc:
PetroLatina Energy Plc (AIM: PELE) is presently focused on Colombia where it currently holds 45% and 20% interests respectively in the Los Angeles and Santa Lucía fields on the Tisquirama licence, and a 100% interest in the Doña María field. In November 2007 the Company secured the extension of the Tisquirama licence for the economic life of the fields. In April 2006 the Group acquired an interest in two exploration blocks: an 85% interest in Midas and an 80% interest in La Paloma. PetroLatina also owns the Río Zulia-Ayacucho pipeline in the prolific Catatumbo basin which transports crude oil. Present exploration/exploitation activities in this area should increase the volume of crude oil transported resulting in an increased cash flow. Having sold its assets in Guatemala it retains a 20% interest in the first three wells and a 20% working interest in future wells. Further information is available on the Company’s website (www.petrolatinaenergy.com).

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