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Petro Rubiales and Pacific Stratus shares fall on news of Colombia merger
TORONTO
Petroleumworld.com 11 14 07
Shares in Petro Rubiales Energy Corp. (TSXV: PEG) and Pacific Stratus Energy Ltd. (TSX:PSE) fell Tuesday after the companies announced a deal to create a major player in Colombia and a significant Toronto Stock Exchange-listed international exploration and production company.Pacific Stratus shares fell 32 per cent at the market open after Monday evening's announcement, while Petro Rubiales stock declined 17 per cent.
"Colombia is becoming one of the hottest places in the world now for oil and gas exploration and production,"
Ronald Pantin, CEO of Petro Rubiales, told a conference call Tuesday to discuss the agreed merger.
After decades of drug-related violence, "all the majors that left the country 10 to 15 years ago are coming back," Pantin said, adding that Petro Rubiales needs to bulk up.
"The only way that we really can access all these opportunities is with this merger."
The new Pacific Rubiales Energy Corp. will have "a diversified and balanced asset portfolio," Pacific Stratus CEO Jose Francisco Arata said on the call.
On the stock market, Pacific Stratus opened at $9.50, down from $14.05 Monday, trading shortly afterward at $10.01, down $4.04 or 29 per cent. Petro Rubiales opened at $1.40, down from $1.53, then fell further to $1.26, down 27 cents or 17 per cent.
The combined company's estimated total diluted stock-market value of $2.5 billion "will position us with a strong currency for further consolidation in not only Colombia but in all of the region of South America where we are actively looking for other opportunities," he said.
He added that the deal has "a lot of upside for the shareholders of Pacific Stratus," who are to receive 8.85 shares of Petro Rubiales for each of their shares, in a deal valued at $670 million.
Pantin said there is a strategic fit and little overlap between the enterprises.
"Pacific Stratus is a gas company and also an exploration company, and we are more a production company."
The deal, subject to a 30-day due diligence period and acceptance by two-thirds of Pacific Stratus shareholders, carries a $20-million break fee if either side fails to complete the arrangement.
The combined company is expected to have net production of 30,000 barrels of oil equivalent per day next year - 14,000 daily barrels of oil from Petro Rubiales and 70 million cubic feet per day of natural gas from Pacific Stratus, rising to 150 million cubic feet per day late in 2008 or early in 2009 with new pipeline development.
Vancouver-based Petro Rubiales - which changed its name from Consolidated AGX Resources Corp. in July, coinciding with a $440-million equity financing and the acquisition of 75 per cent of Rubiales Holdings Ltd. - owns Meta Petroleum, a Colombian company which operates the Rubiales and Piriri oilfields in the Llanos Basin, in association with state-owned Ecopetrol S.A.
Toronto-headquartered Pacific Stratus, which began operation in 2004, has producing properties in Colombia and exploration sites in Peru.
Story from The Canadian Press 13 11 07
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