PRE – Pacific Rubiales Closes $1.3 Billion Oversubscribed Note Offering with $4 Billion Order Book

POSTED ON November 26, 2013 BY Travis McPherson
CATEGORY Colombia, Energy, Oil and Gas, Peru,

Pacific Rubiales predominately produces heavy oil which requires expensive diluents for transportation

The largest independent oil and gas producer in Latin America, Pacific Rubiales (PRE:TSX) has closed its previously announced offering of US$1.3 billion of senior unsecured notes with an interest rate of 5.375% maturing in 2019. PRE is one of the fastest growing and according to Bloomberg their compound production growth over the last five years is 47 percent, the fastest among 109 producers with a market value of at least $5 billion. The notes were placed through a syndicate of underwriters, including Merrill Lynch and Pierce, Fenner & Smith Inc. The proceeds will be used, in part to close the acquisition of Petrominerales (PMG:TSX).

Ronald Pantin, the company's CEO, commented: "We are very pleased with the success of this offering. The order book for the offering exceeded $4.0-billion (U.S.) with broad participation from over 260 investors in the United States, Canada, Latin America (including Colombia), Europe and Asia, which demonstrates the continued confidence of international investors in Pacific Rubiales, its business strategy and future prospects."

In connection with the offering of the notes, the company obtained approval from Peru's Banking, Insurance and Pension Funds Superintendent for registration of the notes in Peru. With this registration, the notes are eligible to be purchased by Peru's pension funds.

Through the PMG acquisition, PRE will gain access to more pipelines

The company is on track to spend $400 million more in capex by year-end with 10 exploration wells and 57 development wells planned. In their recently released third quarter results, they announced average production of 127,728boe/d with much of that being heavy oil. The company has been focused on decreased diluent costs by replacing purchased diluents with their own produced oil for blending. This has seen their diluent costs decline 58% year-over-year and they continue to focus on this as seen through the rationale for purchasing PMG (mainly for light oil production which can be used for blending down their heavy oil).

This $1.3 billion is in addition to the company's $355 million in available cash which will be used to finance the PMG acquisition with working capital left over. With an order book exceeding $4 billion, the company clearly has available capital for further acquisitions of this nature. Clearly investors have appetite for acquisitions of Colombian light oil producers. PRE has made 10 acquisitions in the last 2 years.

Parex Resources (PXT:TSX) is one of the most likely takeover candidates which will likely see Petroamerica (PTA:TSXV) get taken out as well. Parex is up 50% since hitting summer lows on the back of increased M&A activity in the Llanos Basin in Colombia. Petroamerica shares have reacted similarly, up nearly 45% since their summer low of $0.22 per share.

Read: Pacific Rubiales announces closing of U.S. $1.3 billion 5.375% senior unsecured note offering

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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