Pacific E&P Shares Tumble as Driller Plans to Miss Debt Payments

  • Shares listed in Toronto reach fresh nine-year low amid drop
  • Bonds fall after driller invokes grace period on payments

Pacific Exploration & Production Corp. shares plummeted to a nine-year low and the company’s bonds dropped after the Colombian oil producer said it needed to delay debt payments to conserve cash.

The company’s shares sank 43 percent to C$0.45 as of 12:06 p.m. on Friday, reaching the lowest since 2007. Its bonds due 2019 with a face value of $1.3 billion sank 2 cents to 13 cents on the dollar.

Pacific said it won’t make $66 million in interest payments due this month on its bonds, instead involving a 30-day grace period in order to “assess strategic alternatives with respect to its capital structure.” The company has struggled to make good on promises to raise cash by selling assets after a series of takeovers in recent years ballooned the company’s debt.

“PRE’s liquidity position has apparently deteriorated faster than anticipated,” BMO Capital Markets analyst Jared Dziuba said in a report Friday. “This also implies to us that the likelihood of successfully executing previously planned midstream divestitures has decreased.”

Earlier this week, EIG Global Energy Partners announced a tender offer for Pacific’s bonds as part of a plan to buy control of the company and restructure its operations. EIG said that bond prices indicate “no value remains in its equity.”

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