Pacific Rubiales to Gain From Drilling Permits, Citigroup Says

Pacific Rubiales Energy Corp. shares are poised to return 33 percent in the next year as the Colombian driller wins environmental permits to boost output and lowers operating costs, Citigroup Inc. analysts said.

Pending permits for the company’s CPE-6 block and Rubiales field will probably be granted in the second half of the year, and the opening of the Bicentenario pipeline will help lower operating costs, analysts Pedro Medeiros and Fernando Valle wrote in an e-mailed report. Bogota-based Pacific Rubiales is poised for an “earnings growth story in the next six months,” they wrote in the report yesterday.

Pacific Rubiales’s second-quarter profit will drop by 22 percent to $174 million as drilling matures in the Rubiales field, the country’s largest, according to the report. Cost reductions in the quarter will probably help to offset lower oil prices, according to the report. The company is scheduled to announce earnings Aug. 8 after the close of markets.

Citigroup’s target price is C$27 for the Toronto-traded shares over the next 12 months, which would imply a 33 percent return including dividends, according to the report. Canadian markets were closed today for a holiday.

The Bogota-traded shares fell 0.5 percent to 37,460 pesos at 11:25 a.m. local time.

The Bicentenario pipeline is expected to start up this quarter and will provide Pacific Rubiales with about 37,000 barrels a day of transportation capacity, which will reduce the use of more expensive trucks, according to a company report in July.

-- Editors: Bradley Keoun, Dennis Fitzgerald

Before it's here, it's on the Bloomberg Terminal.