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.




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