Pacific Rubiales Tumbles as Oil Rout Fans Debt ConcernAndrew Willis and Christine Jenkins
Pacific Rubiales Energy Corp. fell the most in five years amid concerns over lower oil prices, debt and a bond default at Colombia’s second-largest gold producer, Gran Colombia Gold Corp.
Pacific slid 12 percent to 8,470 pesos at the close in Bogota. Earlier the stock dropped as much as 30 percent to 6,700 pesos, the most since December 2009.
Directors Serafino Iacono, Miguel de la Campa and Hernan Martinez serve on the boards of both companies, according to their websites. Gran Colombia Gold said Jan. 9 it had missed the interest payment due Dec. 31, 2014, on its senior unsecured silver-linked notes due 2018. The miner also said it didn’t pay interest on its senior secured gold-linked notes due 2017.
“The declaration of nonpayment of senior debt at Gran Colombia Gold sparked a lack of confidence among investors,” a report from brokerage Ultrabursatiles said.
Gran Colombia and Pacific Rubiales are completely unrelated, Pacific Rubiales General Counsel Peter Volk said in an e-mailed response to questions. “Anything Gran Colombia does or doesn’t do has zero impact” on Pacific Rubiales or its business, he said.
Pacific Rubiales will have no problem making its interest payments when they are due, Volk said.
“We have no doubt in our ability to easily make our interest payments, and we are equally confident that we will not breach our Ebitda or interest coverage covenants,” he said. “Even if a breach occurred, that would simply restrict our ability to incur additional debt.”
Oil slumped almost 50 percent last year, the most since the 2008 financial crisis, as OPEC resisted calls to cut production even as the U.S. pumped at the fastest rate in more than three decades.
Pacific has said it will scale back spending on exploration projects after the tumbling prices prompted analyst concern for Pacific’s debt levels. The company lowered exploration spending by more than 50 percent, allocating capital to lower-risk short-to medium-term exploration and appraisal projects, Chief Executive Officer Ronald Pantin said in a Dec. 4 statement.
“Under our new crude oil price outlook, Pacific Rubiales risks breaching its debt covenants,” FirstEnergy Capital said in a report Jan. 12. “Given that we are forecasting a cash shortfall in 2015e, this further highlights the need to eliminate the dividend and divest assets.”