Pacific Rubiales Agrees to Acquire C&C Energia and Create a New
Exploration Company
TORONTO,
Nov. 19, 2012 /PRNewswire/ - Pacific
Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) is
pleased to announce it has entered into an arrangement agreement
with C&C Energia Ltd. (TSX: CZE) whereby Pacific Rubiales will
acquire all of the common shares of C&C Energia (the
"Arrangement Agreement").
Pursuant to the Arrangement Agreement, on
closing of the acquisition each common share of C&C Energia
will be exchanged for 0.3528 common shares of Pacific Rubiales and
one common share of a new exploration company
("Newco"). The offer values C&C Energia at
approximately Cdn.$7.81 per share,
representing a premium of approximately 21% to the 20-day
volume-weighted price on the Toronto Stock Exchange of C&C
Energia as at November 16,
2012. In addition, C&C Energia's management
estimates Newco's value to be approximately Cdn.$2.00 per share, representing a combined value of
approximately Cdn.$9.81 and a premium
of approximately 52% over the same period.
Pacific Rubiales is expected to retain a 5%
equity interest in Newco. It is anticipated that the
transaction will be effected by way of a court approved plan of
arrangement ("Arrangement").
Ronald Pantin,
Chief Executive Officer of Pacific Rubiales, commented: "We
consider this to be a win-win for the shareholders of both
companies. For Pacific Rubiales shareholders, it adds production
and reserves at attractive and accretive metrics and assets whose
value can be increased through accelerated activity and
transportation and marketing synergies. For C&C Energia
shareholders, it provides an immediate premium valuation, enhanced
liquidity and participation in the growth of Colombia's largest independent oil company
with a history of generating consistent shareholder returns.
C&C Energia shareholders will also have continued exposure to
the producing assets through the new ownership in Pacific Rubiales
common shares as well as the exploration upside provided by a
well-funded Newco."
Strategic Rationale
Pacific Rubiales believes that this is a highly
strategic acquisition and provides additional visibility to its
ability and leverage to increase production and reserves both
organically and acquisitively at attractive and competitive
metrics.
The key attributes of the acquired C&C
Energia assets are as follows:
- consist of four development blocks (Cravoviejo, Cachicamo,
Pájaro Pinto, Llanos 19 blocks), which are all in the prolific
Colombian Llanos basin;
- in close proximity to Pacific Rubiales' existing heavy oil
production and pipeline infrastructure, allowing for additional
value captured through transportation and marketing
efficiencies;
- 100% working interest and operatorship on all the blocks is
expected to provide an advantageous position to drive activity and
the pace of development;
- provide material production, additional reserves and additional
free cash flow to Pacific Rubiales' existing portfolio in
Colombia;
- current production of approximately 11,500 bbl/d net before
royalties, all of which is high quality and high netback light
oil;
- the light oil production can be used to meet Pacific Rubiales'
growing requirement for diluent to mix with its heavy oil
production at a lower cost; and
- Pacific Rubiales believes it will be able to quickly ramp up
production on the Llanos development blocks within a 12 month
period, capturing and accelerating value.
In addition, Pacific Rubiales and the
shareholders of C&C Energia will retain upside potential on the
exploration assets through their equity ownership of Newco.
It is anticipated that Newco will acquire C&C Energia's
interests in the Coati, Andaquies, Morpho and Putumayo-8 blocks in
Colombia and receive cash from
C&C Energia in the amount of approximately U.S.$80 million, subject to working capital
adjustments.
Terms of the Arrangement
The Arrangement is subject to approval by the
shareholders of C&C Energia, court approval, regulatory, stock
exchange and other approvals, and satisfaction of all other
customary closing conditions. To proceed, the Arrangement
must be approved by at least 66 2/3 of C&C Energia's
shareholders. The Arrangement is expected to close in the
first quarter of 2013.
The Arrangement Agreement also provides that
C&C Energia will pay Pacific Rubiales a non-completion fee of
Cdn.$15 million in certain
circumstances and a reciprocal non-completion fee is payable by
Pacific Rubiales to C&C Energia in certain circumstances.
The Arrangement Agreement includes customary provisions, including
no solicitation of alternative transactions, right to match
superior proposals and fiduciary-out provisions.
Board of Director Recommendation and
Financial Advisors
The board of directors of C&C Energia has
approved the Arrangement Agreement and has resolved to recommend
that the shareholders of C&C Energia vote in favour of the
Arrangement.
Pacific Rubiales' financial advisor is GMP
Securities L.P.; its legal advisor is Norton Rose Canada LLP in
Canada and Colombia. C&C Energia's financial
advisor is FirstEnergy Capital Corp. ("FirstEnergy"); its
legal advisor is Blakes, Cassels & Graydon LLP in Canada and Posse Herrera Ruiz in Colombia.
FirstEnergy has provided the board of directors
of C&C Energia with an opinion that, subject to its review of
the final form of documentation effecting the Arrangement, the
consideration to be offered by Pacific Rubiales to the shareholders
of C&C Energia under the Arrangement is fair, from a financial
point of view, to the shareholders of C&C Energia.
Support Agreements
The Arrangement has the support of executive
officers of C&C Energia as well as certain directors and
shareholders who collectively hold approximately 41% of the fully
diluted common shares of C&C Energia. Each of the
aforementioned executive officers, directors and shareholders has
entered into support agreements in favour of the Arrangement.
Conference Call
Pacific Rubiales has scheduled a telephone
conference call for investors and analysts on Wednesday November 21, 2012 at 8:00 a.m. (Bogotá and Toronto time) / 11:00
a.m. (Rio de Janeiro time)
to discuss the Arrangement. Participants will include Ronald Pantin, Chief Executive Officer, and
selected members of senior management. Additional details will be
published via news release prior to the conference call.
Information About Pacific Rubiales
Pacific Rubiales, a Canadian-based company and
producer of natural gas and heavy crude oil, owns 100% of Meta
Petroleum Corp., a Colombian oil operator which operates the
Rubiales, Piriri and Quifa oil fields in the Llanos Basin in
association with Ecopetrol, S.A., the Colombian national oil
company, 100% of Pacific Stratus Energy Colombia Corp., which
operates the La Creciente natural gas field, and light oil assets
from the recent acquisition of PetroMagdalena Energy Corp.
Information About C&C Energia
C&C Energia is engaged in the exploration
for and the development and production of oil resources in
Colombia. C&C Energia owns
eight blocks (seven operated) and approximately 597,000 acres
(478,000 net acres) in Colombia.
Forward Looking Information
This press release contains forward-looking
statements. All statements, other than statements of historical
fact, that address activities, events or developments that Pacific
Rubiales believes, expects or anticipates will or may occur in the
future are forward-looking statements. In particular, this press
release contains forward looking-looking statements in respect to
the following: anticipated benefits of the Arrangement; the
performance characteristics of Pacific Rubiales' oil and natural
gas properties; oil and natural gas production levels; the quantity
of Pacific Rubiales' oil and natural gas reserves and anticipated
future cash flows from such reserves; the quantity of drilling
locations in inventory; projections of commodity prices and costs;
supply and demand for oil and natural gas; and treatment under
governmental regulatory regimes.
This press release also contains
forward-looking statements and information concerning the
anticipated completion of the Arrangement and the anticipated
timing for completion thereof. Pacific Rubiales has provided these
anticipated times in reliance on certain assumptions that they
believe are reasonable at this time, including assumptions as to
the timing of receipt of the necessary regulatory and court
approvals and the time necessary to satisfy the conditions to the
closing of the Arrangement. These dates may change for a number of
reasons, including unforeseen delays in preparing meeting
materials, inability to secure necessary regulatory or court
approvals in the time assumed or the need for additional time to
satisfy the conditions to the completion of the Arrangement.
Accordingly, readers should not place undue reliance on the
forward-looking statements and information contained in this press
release concerning these times.
By their nature, forward-looking statements
are subject to a number of risks, uncertainties and assumptions,
which could cause actual results or other expectations to differ
materially from those anticipated. Certain of these risks are set
out in more detail in the Pacific Rubiales' annual information form
dated March 14, 2012 which has been
filed on SEDAR and can be accessed at www.sedar.com.
Factors that could cause actual results or
events to differ materially from current expectations include,
among other things: financial risk of marketing reserves at an
acceptable price given market conditions; volatility in market
prices for oil and natural gas; delays in business operations,
pipeline restrictions, blowouts; the risk of carrying out
operations with minimal environmental impact; industry conditions
including changes in laws and regulations including the adoption of
new environmental laws and regulations and changes in how they are
interpreted and enforced; uncertainties associated with estimating
oil and natural gas reserves; economic risk of finding and
producing reserves at a reasonable cost; uncertainties associated
with partner plans and approvals; operational matters related to
non-operated properties; increased competition for, among other
things, capital, acquisitions of reserves and undeveloped lands;
competition for and availability of qualified personnel or
management; incorrect assessments of the value of acquisitions and
exploration and development programs; unexpected geological,
technical, drilling, construction and processing problems;
availability of insurance; fluctuations in foreign exchange and
interest rates; stock market volatility; failure to realize the
anticipated benefits of acquisitions; general economic, market and
business conditions; uncertainties associated with regulatory
approvals; uncertainty of government policy changes; uncertainties
associated with credit facilities and counterparty credit risk; and
changes in income tax laws, tax laws, royalty rates and incentive
programs relating to the oil and gas industry.
Any forward-looking statement speaks only as
of the date on which it is made and, except as may be required by
applicable securities laws, Pacific Rubiales disclaim any intent or
obligation to update any forward-looking statement, whether as a
result of new information, future events or results or otherwise.
Although Pacific Rubiales believes that the assumptions inherent in
the forward-looking statements are reasonable, forward-looking
statements are not guarantees of future performance and accordingly
undue reliance should not be put on such statements due to the
inherent uncertainty therein.
This news release was prepared in the English
language and subsequently translated into Spanish and
Portuguese. In the case of any differences between the
English version and its translated counterparts, the English
document should be treated as the governing version.
SOURCE Pacific Rubiales Energy Corp.