Pacific Rubiales Posts Record Drop as Alfa Takeover Bid Quashed
(Bloomberg) -- Pacific Rubiales Energy Corp. shares and bonds plunged the most on record after the Colombian oil producer’s would-be suitors withdrew their takeover offer.
The stock dropped as much as 48 percent and was down 41 percent to C$3.12 at 2:25 p.m. in Toronto as its benchmark bonds sank 13 percent. Analysts cut their target price for the shares from the C$6.50 bid price to as low as C$0.25 on concern the company will struggle to survive without a new buyer.
Mexico’s Alfa SAB and partner Harbour Energy Ltd. dropped plans to acquire Pacific Rubiales after its largest shareholder spurned the offer once valued at as much as $1.7 billion. Without the takeover, analysts are focusing on whether Pacific will be able to shore up its finances given what the company itself has called “notable risks” that include the slump in oil prices, the loss of its main field next year and challenges at other Colombian projects, according to a June 18 statement.
“Pacific Rubiales has, in recent weeks, made it abundantly clear that, as an independent company, it will necessarily have to focus on cost-cutting, asset sales and debt reduction,” David Dudlyke, an analyst at Dundee Securities Ltd., said in a note in which he cut his target price to C$3. The deal’s breakdown also raises concern that Alfa, which holds just under a 19 percent stake, may no longer want to partner with Pacific to drill in Mexico, Dudlyke wrote.
Alfa shares rose 3.6 percent to 31.18 pesos in Mexico City.
Pacific said in Wednesday’s statement that it would continue with its plans to reduce debt and operating costs and to divest non-core assets. It said it would also continue to pursue opportunities in Mexico with Alfa as a partner.
Debt Burden
Since May, Pacific Rubiales and the companies seeking to buy it have tried to convince shareholders that a takeover was preferable to the struggle it would face alone. Co-chairman Serafino Iacono had said that without a takeover, “this company will deal mostly with keeping its production profile going and producing oil to generate cash to pay, or repay, for the next three to five years its debt. It will have very little room for growth,” according to a call three weeks ago.
Meanwhile, Pacific’s biggest investor, O’Hara Administration Co. had said a fair price for Pacific Rubiales would be more than C$9 a share. Otherwise, it wants to retain its stake on the assumption that the company will be worth more in three years after board and management changes, spokesman Orlando Alvarado said Sunday.
Today’s drop brings the stock’s slump to 85 percent over the past year. The shares had traded as high as C$23.80 during 2014 before the collapse in oil prices.
--With assistance from James Attwood in Santiago.
To contact the reporters on this story: Christine Jenkins in Bogota at cjenkins28@bloomberg.net; Andrew Willis in Bogota at awillis21@bloomberg.net To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Matthew Bristow
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Gunvor CEO Sees Russian Refining Capacity Taking Hit from Drone Strikes
- These Factors Helped Brent Oil Price Break Above $85
- Sinopec Engineering Posts Higher Annual Petrochemicals Revenue
- Imperial Pipeline in Winnipeg Goes Offline for Three Months
- Gaz System to Acquire Gas Storage Poland
- Subsea7 Secures Contract to Service Woodside's Trion
- Adnoc Inks Supply Deal for Ruwais LNG Project with Germany's SEFE
- EIA Boosts USA Crude Oil Production Forecasts
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension