Pacific Rubiales Reduced at Raymond James on ‘Geopolitical Risk’

A new investment in Pacific Rubiales Energy Corp. demands a “tolerance for some geopolitical and geological risk,” Raymond James Ltd. said as the brokerage firm cut its rating on the stock.

To such investors, the shares look attractive after tumbling since March 13, when the company said it would have a fourth-quarter charge because of an adverse court ruling, Raymond James analysts said today in a report. The analysts, Rafi Khouri and Ana Wessel, cut their rating to “outperform” from “strong buy.”

The stock’s price doesn’t reflect the potential for Pacific Rubiales to increase production and reserves, the analysts said. That possibility is “a free option,” they wrote. Raymond James cut its price target for the Canadian-traded shares by 7.7 percent to C$30.

The shares fell 2.6 percent to 38,400 pesos today in Bogota. The stock has tumbled for eight straight days, for a total drop of 14 percent. The company’s Canadian-traded shares fell 1.9 percent today to C$21.80.

Pacific Rubiales posted a quarterly loss after an arbitrator ruled in favor of Colombia’s government-owned oil producer, Ecopetrol SA, in a dispute over the split of royalties from their shared Quifa SW oilfield. Pacific Rubiales has said it’s evaluating alternative remedies under Colombian laws and applicable international treaties.