January 15, 2015 / 1:33 AM / 4 years ago

UPDATE 1-Oil producer Pacific Rubiales denies rumors about debt default

(Recasts with market rumor on debt default)

By Tanvi Mehta

Jan 14 (Reuters) - Canadian oil and natural gas producer Pacific Rubiales Energy Corp denied market rumors regarding its debt obligations that briefly halted trading and sent shares to a five-year low on Wednesday.

“Contrary to market rumors, the company is not in default under any of its debt obligations and does not expect to be at risk of payment default,” Chief Executive Officer Ronald Pantin said in a statement.

Shares of Pacific Rubiales, the biggest private oil producer in Colombia, were briefly halted during the day.

Trading resumed later and the company’s shares fell to a five-year low of C$3.35 and closed at C$4.21.

An analyst report warned that the company might breach an incurrence test requiring the ratio between its consolidated debt and its earnings before interest, tax, depreciation and amortization (EBITDA) to be below 3.5:1.0. The company said the ratio was currently 1.8:1.0.

Traders said the company’s bonds dropped 10 to 14 points as thin liquidity exacerbated moves and drove bid-offer spreads wider. The 5.625 percent 2025s traded at $55.50 to $56.50. The 5.125 percent 2023s traded at $52.50 to $54.

Earlier on Wednesday, the company joined Canadian oil and gas producers in cutting capital budgets, citing falling oil prices amid a supply glut and the OPEC’s refusal to curb production.

Pacific Rubiales cut its 2015 capital budget to a range of $1.1 billion to $1.3 billion, from $1.5 billion.

The Toronto-based company said it expects to produce 150 million to 160 million barrels of oil equivalent per day (mboe/d) in 2015.

The oil and gas producer had earlier forecast 2015 production of 155 to 160 mboepd.

U.S. bank Goldman Sachs slashed its oil forecasts on Monday, saying crude oil prices could come down much further in the short term, possibly into the high $30s a barrel before the market saw a rebound.

Brent crude rose 4.5 percent, to settle at $48.69 a barrel, in its strongest daily percentage gain since June 2012.

Reporting by Tanvi Mehta in Bengaluru; Editing by Chris Reese and Lisa Shumaker

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