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Pacific Rubiales jumps as Mexico’s Alfa looms as oil partner

ANDREW WILLIS and BRENDAN CASE

BOGOTA, Colombia (Bloomberg) -- Pacific Rubiales Energy rose the most among major Colombian stocks after Mexico’s Alfa became the oil producer’s third-largest shareholder, fueling speculation the purchase will herald operational partnerships.

The shares jumped 5.6% to 34,200 pesos at 1.32 p.m. in Bogota while Colombia’s benchmark index was little changed. Alfa, a conglomerate with energy assets in Mexico and the U.S., said on May 20 that it built a 10% stake in Pacific Rubiales and may buy more stock.

The transaction raises questions about Alfa’s intentions after the San Pedro Garza Garcia, Mexico-based group said the stake, worth more than $500 mn, is a “financial investment.” Alfa is increasing exposure to energy at a time it may seek to produce oil and gas at home after Mexico ended a 75-year state monopoly. Pacific Rubiales is looking at opportunities in Mexico and hired Bank of America to review strategic options, spurring speculation it may be bought.

“We will work with the base case that Alfa’s stake in Pacific Rubiales is a sign of a potential joint venture, which would reinforce our bullish view on Alfa’s energy business,” Credit Suisse Group analysts Vanessa Quiroga and Maria Madrazo wrote in a client note. They see a low likelihood that Alfa would move ahead with an outright acquisition.

Alfa’s Newpek venture is an energy producer in the U.S. It also has petrochemical, food and auto-part assets. The Mexican company bought 97,700 Pacific Rubiales shares on the Toronto exchange on May 20 at C$18.43, bringing its total to 31.4 mn.

Alfa reported the transaction to comply with Canadian law, spokesman Enrique Flores said, declining to comment on whether it would seek a controlling stake.

The share purchase is a “financial investment” that may go up or down in the future “depending on markets, the performance of Pacific Rubiales or the economy,” he said by phone.

Pacific Rubiales, Latin America’s largest non-state-owned oil producer, has been investigating opportunities in Mexico for two years and would be interested in a JV with state-run Pemex CEO Ronald Pantin said at an investor event May 13.

Pantin confirmed at the time that his company had hired a strategic adviser, saying it was limited to the future of the company’s midstream assets.

Alfa hasn’t been in contact with Pacific Rubiales to explain its intentions for the shareholding, the Colombian producer said today in an emailed response to questions.

05/22/2014

 

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