Pacific Rubiales to lose flagship oil field

OREANDA-NEWS. March 16, 2015. Colombia's state-controlled Ecopetrol will not extend Canadian independent Pacific Rubiales' contract to operate the flagship Rubiales heavy oil field when it expires in June 2016, Ecopetrol said today.

The imminent loss of the field raises questions about the future of Pacific Rubiales, which some investors see as a takeover target.

Rubiales produces around 175,000 b/d of oil equivalent, of which 58,000 boe/d is net to Pacific Rubiales with Ecopetrol taking the remainder.

Pacific Rubiales? net fourth quarter 2014 production was 143,000-149,000 boe/d.

In a recent presentation, the company said it is targeting 150,000-160,000 boe/d of net production in 2015, up by 1-8pc from estimated 2014 output.

The company submitted a proposal to Ecopetrol last year for a new Rubiales operating contract in which it would apply infield drilling and enhanced oil recovered to maintain production.

Ecopetrol said today it "will evaluate different alternatives for the operation of Rubiales."

Pacific Rubiales said it will study the possibility for presenting another proposal to operate the field.

Like many other oil companies, Pacific Rubiales has been cutting spending and costs in response the sharp decline in oil prices since mid-2014. The company plans capital expenditures of \\$1.1bn-1.3bn in 2015 based on a WTI price of \\$55-60/bl.

The company has been moving aggressively to participate in Mexico?s upstream opening. The firm has a 50:50 joint venture with Mexico?s Alfa to bid on acreage there. Alfa is already a significant minority shareholder in Pacific Rubiales.

Pacific Rubiales has a total of 95 blocks in Colombia, Brazil, Guatemala, Belize, Peru, Guyana and Papua New Guinea.