Pacific Rubiales Energy Corp., Latin America’s largest non-state-owned oil producer, said it expects to generate as much as $1.4 billion from the sale of infrastructure assets to reduce debt and buy back shares.
The company, which trades in Bogota and Toronto, accepted an offer from a private equity firm for a 38 percent stake in its Pacific Midstream unit, which will generate close to $400 million, Chief Executive Officer Ronald Pantin said in an interview in Bogota. Shares rose the most in six months.
Pacific, which last month announced the sale of its Ocensa pipeline interest, plans to bundle the remaining Midstream stake with other infrastructure assets and sell as much as 60 percent in an initial public offering in the second half of 2015, Pantin said. The company, which is also considering another overseas listing, intends to use proceeds of the sales to reduce debt to about $3 billion and help fund a share buyback program.
“We are thinking of maybe going to list the company in New York or London - somewhere that recognizes better the value of this company,” he said yesterday. “We have a meeting with our advisers next week and then we will decide.”
Pacific shares rose 4.5 percent to 32,340 pesos at 11:48 a.m. in Bogota as Colombia’s main index added 0.3 percent. The stock is down 25 percent in the past year through yesterday and trades at 16 times reported profit, compared with an average ratio of 25 for global peers, according to data tracked by Bloomberg.
Pacific expects to generate a total of $1.2 billion to $1.4 billion from its Ocensa and Pacific Midstream stake sales and next year’s IPO of other infrastructure assets. The company’s total debt stands at $3.7 billion, according to data compiled by Bloomberg.
“This all helps to pay for capex and reduce leverage,” Diego Usme, an analyst at Ultrabursatiles, said by phone from Bogota.
Pacific shares fell in the previous two sessions after Colombia’s comptroller for mines and energy said the company’s oil-recovery technology, known as STAR, was falling behind government expectations. Pantin reiterated that results show a doubling of the recovery factor and that a further two wells have been added to the original eight in the pilot study.
Pacific is in negotiations to sell its Papua New Guinea assets this year, and will push forward with a share buyback plan, Pantin said.
“We have bought back very close to 4 million shares and we will continue doing so,” he said. “We have been authorized for a 10 percent buyback of the company by the board.”
The company is also taking a look at Mexico after Congress approved broad guidelines to open the country’s oil industry to competition in December. Congressional debate on details of oil contracts of foreign companies entering Mexico will begin in February.
“We like Mexico,” Pantin said. “We think that Mexico has a lot of potential for heavy oil. That’s our major expertise. We are already on the ground, we have been looking at opportunities. Let’s see.”