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Press release from Marketwire

Petrominerales Announces Accretive Convertible Bond and Share Buyback Transactions

Thursday, May 31, 2012

Petrominerales Announces Accretive Convertible Bond and Share Buyback Transactions16:29 EDT Thursday, May 31, 2012CALGARY, ALBERTA--(Marketwire - May 31, 2012) -NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATESPetrominerales Ltd. ("Petrominerales" or the "Company") (TSX:PMG) (BVC:PMGC), is pleased to announce that we have commenced a private placement offering (the "Offering") of US$400 million aggregate principal amount of new Senior Unsecured Convertible Bonds due 2017 (the "New Bonds"), and simultaneously we invite certain offshore holders of the Company's existing 2.625% Senior Unsecured Convertible Bonds bearing ISIN NO0010583990 (the "Existing Bonds") to submit offers to sell their Existing Bonds to Petrominerales for cash consideration (the "Buy-Back Invitation"). The completion of the Offering is conditional upon the successful tendering of a minimum of US$150 million aggregate principal amount of Existing Bonds and the Buy-Back Invitation is conditional upon the successful Offering of New Bonds.As part of issuing the New Bonds, Petrominerales will repurchase and cancel between five and seven million common shares from certain offshore holders at today's closing stock price on the Toronto Stock Exchange.The Company believes that these transactions represent an effective method for Petrominerales to extend its debt maturity profile, minimize dilution and secure inexpensive working capital. In addition, the repurchase of approximately six percent of our outstanding common shares demonstrates confidence in our future business plans and reinforces our focus on per share production and reserve growth. The remaining net proceeds from these transactions will be used to fund our oil and gas exploration and development activities in Latin America.Assuming the successful execution of the Offering, the Buy-Back Invitation and common share buy-back, the Company would receive net proceeds from the Offering of approximately US$70 million, before expenses, and the fully-diluted shares would decrease by approximately one percent, as described in following table and notes.Transaction Amount (US$)Convertible Bond Debt Outstanding (US$)Share PriceNumber of Shares Outstanding or Potentially OutstandingCommon shares outstanding99,758,2102016 convertible debentures outstanding, May 31, 2012 (1)521,800,000Cdn$14.0038,389,571Total before contemplated transactions-521,800,000138,147,781New Bond Offering, due 2017400,000,000400,000,000US$18.3521,798,365Repurchase of common shares (2)(80,000,000)Cdn$14.00(5,885,714)Repurchase of 2016 convertible bonds (3)(237,500,000)(250,000,000)(18,392,857)Net bond proceeds after transactions (4)82,500,000Total debt after transactions671,800,000Total debt, net of cash proceeds589,300,000Fully diluted common shares after transactions135,667,575Percent decrease in fully diluted common shares-2%Notes:Prior to these transactions, Petrominerales repurchased US$28.2 million principal amount of the Existing Bonds at 0.9505 through private transactions, leaving US$521.8 million of Existing Bonds outstanding before the Buy-Back Invitation. The remaining 2016 convertible bonds outstanding have a one-time put option right of prepayment of the debentures for 100 percent of the par value plus accrued interest on August 25, 2013. The debenture holders must exercise their put option within a 30 day period between June 10 and July 10, 2013. At the current share price the Company would need to issue 38.4 million common shares to repay the outstanding convertible bonds. The number of common shares is an estimate and is expected to range between five and seven million shares. The minimum amount of bonds to be repurchased is US$150 million. We have assumed US$250 million of principal value of the bonds would be repurchased at recent trading price of 0.95. Before expenses of the transactions. Assumed $1.03 Cdn = $1US.THE OFFERING OF NEW BONDSThe New Bonds will be convertible into common shares of Petrominerales ("Common Shares") and are expected to have an annual coupon in the range of 2.875% to 3.625% and a conversion premium of 32.5% to 37.5% over today's closing price of the Common Shares on the Toronto Stock Exchange. The New Bonds will be issued at 100% of their principal amount and, unless previously redeemed, converted or cancelled, will mature in June 2017. The New Bonds are expected to be issued on or about June 12, 2012. The Offering is subject to certain approvals, including the approval of the Toronto Stock Exchange.The pricing mechanism in the New Bond offering is a significant improvement from previous convertible bond transactions completed by Petrominerales, as the bond reference price is fixed based on today's closing price of the Company's common shares. The reference price in our previous convertible bond transactions was based on a volume weighted average share price for a period following announcement of the transaction which resulted in temporary underperformance of our shares in the market.THE BUY-BACK INVITATION FOR EXISTING BONDSThe Buy-Back Invitation is made for an aggregate principal amount of minimum US$150 million and maximum US$275 million. The purchase price range under the Buy-Back Invitation is from US$95,000 to US$100,000 per US$100,000 of principal amount, with the final price to be determined based on a modified Dutch Auction Procedure as described below. The modified Dutch Auction Procedure will allow bondholders to submit either: (i) competitive offers specifying the price per Existing Bond that a bondholder would be willing to accept as the purchase price; or (ii) non- competitive offers to sell Existing Bonds to Petrominerales that do not specify a price. All bondholders whose offers are accepted by Petrominerales will be entitled to the same purchase price, determined at the discretion of Petrominerales, subject to certain limitations. Holders of the Existing Bonds may submit offers to sell their Existing Bonds to Petrominerales from May 31, 2012 to June 1, 2012 at 9:30 AM Eastern Standard Time, unless extended by Petrominerales. Preference will be given to the holders of the Existing Bonds switching into the New Bonds.ABG Sundal Collier Norge ASA has been engaged as the sole manager for both the Offering and the Buy-Back Invitation.OUTLOOKOur long-term objective is to focus on delivering high-impact exploration success, building net asset value, and generating attractive total returns for shareholders through the following strategies: Growth in reserves through the execution of a balanced, diversified exploration drilling program; Maintain a multi-year drilling inventory of exploration prospects by continually adding to our land position and acquiring high quality 3D seismic over those lands, in 2012 we plan to acquire over 1,000 square kilometres of new 3D seismic data; Explore for and develop large heavy oil resource accumulations; Rapidly convert new discoveries into production and cash flow; Demonstrate leadership in oil and gas exploration, deployment and development of technology, a Company- wide focus on innovation, constant regard for the health and safety of our employees, emphasis on industry leading environmental performance and ongoing, meaningful dialogue with our stakeholders; and Provide a dividend yield to investors.Our production base continues to generate significant cash flows, $200 million in the first quarter, and our strong balance sheet includes cash on hand of $176 million at March 31, 2012 and a completely undrawn, secured credit facility. Our immediate focus is on executing our high-impact exploration drilling programs in Colombia and Peru. In addition, we are acquiring over 1,000 square kilometres of new 3D seismic that we expect will add significantly to our prospect inventory and provide new drilling opportunities for our 2013 program. We are very encouraged by our early results on our first foothills well, Bromelia, and our Guala well on the Corcel Block and look forward to updating our shareholders on our progress through 2012.IMPORTANT DISCLAIMER:This press release may not be published, distributed or transmitted in the United States (including its territories and dependencies, any state of the United States and the District of Columbia) (collectively, the "United States") or to "U.S. persons" (as such term is defined in Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"). This press release does not constitute an offer to sell or a solicitation of an offer to purchase securities in the United States or to U.S. persons. The securities mentioned herein have not been and will not be offered or sold in the United States, unless they are registered or exempt from registration under the U.S. Securities Act. Petrominerales does not intend to register any portion of the offering in the United States or to conduct a public offering of securities in the United States.Petrominerales Ltd. is an international oil and gas company operating in Latin America since 2002. Today, Petrominerales is the most active exploration company and the fourth largest oil producer in Colombia. Our high quality land base and multi-year inventory of exploration opportunities provides long-term growth potential for years to come.Forward-Looking Statements. Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to the Company's future exploration and development activities, the use of proceeds from the Offering and the timing for completion of the Offering and the Invitation. The forward-looking statements are based on certain key expectations and assumptions, including expectations and assumptions concerning the availability of capital, the receipt of applicable regulatory approvals, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, prevailing commodity prices and economic conditions, the availability of labour and services, the ability to transport and market our production, timing of completion of infrastructure and transportation projects, weather and access to drilling locations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability; availability of transportation and offloading capacity, outcome of exploration contract negotiations; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrominerales that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, Petrominerales assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.FOR FURTHER INFORMATION PLEASE CONTACT: Corey C. RuttanPetrominerales Ltd.President and Chief Executive Officer403.705.8850 or 011.571.629.2701ORJack F. ScottPetrominerales Ltd.Chief Operating Officer403.705.8850 or 011.571.629.2701ORKelly D. SledzPetrominerales Ltd.Chief Financial Officer403.705.8850 or 011.571.629.2701www.petrominerales.com