Canada-based Pacific Rubiales Energy, Colombia’s leading independent oil company, which is ranked amongst the world’s fastest growing crude producers, announced on Sunday it has agreed to buy Petrominerales, a smaller company operating in the Andean country.
Pacific Rubiales, formed out of exiled talent from PDVSA, Venezuela’s state oil company, will acquire all of Toronto-listed Petrominerales’ assets in Colombia and Peru, as well as a percentage on two oil pipelines. The total value of the deal, including net debt, is $1.55bn.
“This acquisition is an excellent fit with our strategy” said Ronald Pantin, Pacific Rubiales’s chief executive, adding that that the purchase of Petrominerales gives his company access to low-density crude that “can be integrated with our growing heavy oil production.”
“This not only strengthens our focus in Colombia and Peru, but also builds on our proven track record of extracting value by growing production and generating cash flow,” he said.
According to Pacific Rubiales, the purchase will be financed with cash and a $1.3bn bank loan. The company has been expanding in recent years, making acquisitions in stakes in blocks as well as companies.
According to a note sent early on Monday by Bancolombia:
We see a win-win for both parties; Petrominerales shareholders will be receiving a good premium for their participation, on a company that had a tough road ahead, with tight cash; while Pacific Rubiales will continue consolidating its portfolio in Peru and Colombia, well known basins, on an acquisition that we see as strategic from the synergies that it brings to the company in terms of the light oil for diluents and the pipeline assets. We also highlight the quality of the assets that Petrominerales has, both in Colombia and Peru that in the hands of Pacific Rubiales we believe can have more potential given the companies cash availability and technical expertise for exploration.
Certainly, in big part thanks to Venezuelan production technology, Pacific Rubiales appears more than capable of exploiting the recently acquired blocks, as the company has jumped from extracting 25,000 barrels of oil equivalent a day when it started operations in 2007, to expecting 250,000 boe/day this year, before this deal was announced.
Like other natural resource producers in Colombia and elsewhere, both Pacific Rubiales and Petrominerales are registered and have primary stock market listings in Canada. Last Friday, amid speculation of the acquisition, trading of both companies’ shares was stopped in Toronto. Petrominerales shareprice had surged 7.65 per cent on Friday.
Pacific Rubiales was the first international company to list in Bogotá (and is also now trading in São Paulo). The company has strengthened the phenomenon of Toronto-listed oil producers operating in Colombia, such as Petrominerales, Canacol and even Ecopetrol, the Andean country’s state-run oil giant.