Pacific E&P Pares 74% Gain as Takeover Speculation Wanes

  • Company says syndicate of lenders formed steering committee
  • Lazard Freres & Co. appointed as financial advisers for talks

Shares in Pacific Exploration & Production Corp. pared gains after a company news release saying that lenders are forming a steering committee damped some investors’ hopes that asset sales or a takeover offer had been imminent.

Shares in Bogota closed up 21 percent to 4,510 pesos, after rising as much as 74 percent earlier in the day before trading was halted in Bogota and Toronto.

Pacific said the syndicate of lenders under its $1 billion revolving credit agreement have formed a steering committee to negotiate the terms of a potential extension of covenants, currently in place until December 28, 2015. The company is seeking a similar extension for smaller loans that involve HSBC Bank USA, Bank of America and Banco Latino Americano de Comercio Exterior SA.

“This is an anti-climactic result to the earlier run-up in the shares and multiple circuit-breaker halts, which we suspected may be on speculation of planned midstream asset sales, (major liquidity boost) or a less likely takeover offer,” Jared Dziuba, a BMO Capital Markets analyst, wrote in a report. Today’s news does not justify the stock’s gains over the last week, Dziuba said.

The Colombia-based driller also announced the appointment of Lazard Freres & Co. LLC as its financial adviser in order to assist with the negotiations, saying it is not aware of any other material information that could account for the recent share price movement.

Earlier, shareholder Alfa SAB said it didn’t know why Pacific shares are rising, according to an e-mailed response to questions.

“The market expected more,” than the news contained in the press release, said Sebastian Gallego, an analyst at Credicorp Capital, speaking by phone from Bogota.

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