* Offer of C$7.81 is at 4 pct premium to C&C's Friday close
* Deal expands Pacific Rubiales presence in Llanos basin
* Shares of C&C Energia rise as much as 25 pct
By Bhaswati Mukhopadhyay
Nov 19 Canadian oil and natural gas producer
Pacific Rubiales Energy Corp will buy rival
Colombia-focused C&C Energia Ltd in a deal valued at
about C$500 million ($500 million) as oil production in the
South American country regains momentum after years of decline.
Colombia, Latin America's fourth-largest oil producer, hopes
for a 20-fold increase in oil reserves to 41 billion barrels by
The acquisition gives Pacific Rubiales access to four blocks
in the prolific Llanos basin, which contains Colombia's largest
producing oilfield -- the Rubiales. The oilfield accounts for
most of Pacific Rubiales's gross operated production.
C&C Energia, which currently produces about 11,500 barrels
of oil per day, holds interests in eight blocks in Colombia
spread over 597,000 acres. It operates seven of these blocks.
Pacific Rubiales produced 97,142 barrels of oil equivalent
per day, net of royalty, in the quarter ended Sept. 30.
C&C Energia's light oil production can be used to meet
growing requirements for diluent to mix with heavy oil
production at a lower cost, Pacific Rubiales said. A diluent is
used to dilute heavy oil to help it move through pipelines.
"They are buying light oil production right next to where
they have heavy oil production. They are adding to their own
light oil inventory, which should potentially eliminate the
amount of light oil they need to buy in the open market," said
Raymond James analyst Rafi Khouri.
Shares of C&C Energia, which had a market value of about
C$479 million as of Friday close, rose 25 percent to C$9.41 on
the Toronto Stock Exchange on Monday.
Shares of Pacific Rubiales, which has a market value of
about C$6.54 billion, fell 2 percent to C$21.72.
"There is not probably a lot of upsides on those blocks,"
analyst Ian Macqueen of CIBC said. "I am neutral to it."
Shares of Petrominerales Ltd, which operates in the
Deep Llanos basin, rose 5 percent to C$7.92.
NEW EXPLORATION CO
Pacific Rubiales's offer of about C$7.81 per C&C Energia
share represents a premium of 4 percent to the stock's Friday
close of C$7.50.
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, Pacific Rubiales said.
Pacific Rubiales is likely to retain a 5 percent stake in
the new exploration company, which is expected to acquire C&C
Energia's interests in the Coati, Andaquies, Morpho and
Putumayo-8 blocks in Colombia and receive cash of about $80
million from C&C Energia.
C&C Energia values the new exploration company, which will
be led by its Chief Executive Randy McLeod, at about C$2.00 per
share, representing a combined offer of about C$9.81.
The transaction, which provides for a non-completion fee of
C$15 million, is expected to close in the first quarter of 2013.
GMP Securities L.P advised Pacific Rubiales, while
FirstEnergy Capital Corp was the adviser for C&C Energia.