TEXT-Fitch on Pacific Rubiales and C&C Energia deal
Nov 26 - Fitch Ratings views Pacific Rubiales Corp.'s (Issuer Default Rating 'BB+') proposed acquisition of C&C Energia Ltd (C&C) as neutral to slightly positive for Pacific Rubiales' credit quality. According to the announced proposal, Pacific Rubiales will acquire all of C&C's producing assets in Colombia in a stock swap. Pacific Rubiales would also acquire a 5% participation in a new company, which is yet to be created, that will own all of C&C's exploration assets. This acquisition will add approximately 18.4 million barrels of oil equivalent (boe) of proved and probable reserves and increased the company's gross production by approximately 11,424 barrels per day. Pacific Rubiales' production profile will improve through this transaction, as C&C's lighter crude production will provide Pacific Rubiales with a more favorable diluent source to transport its heavy crude production. Pacific Rubiales estimates that this acquisition will represent savings of approximately USD376 million per year on diluent cost. Pacific Rubiales will issue approximately 22 million shares to C&C's shareholder in exchange for their production assets and for a 5% interest in the new company. The value of C&C's production assets and the 5% interest in the new company are estimated at approximately USD490 million and USD130 million, respectively, based on the company's offered. This translates into an acquisition cost of approximately USD620 million. Pacific Rubiales is not expected to assume any new debt as part of this acquisition. Pacific Rubiales' ratings are supported by the company's position as the largest independent oil and gas producer in Colombia and a strong management team with significant expertise in heavy oil exploration and production. The ratings also reflect the company's strong liquidity and low leverage. Pacific Rubiales' credit quality is tempered by the company's small scale, production concentration and relatively small reserve profile. The company also benefits somewhat from its partnerships with Ecopetrol (IDR 'BBB-'), Colombia's national oil and gas company, which shares in Pacific Rubiales' investments and production. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (Aug. 8, 2012). Applicable Criteria and Related Research: Corporate Rating Methodology
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