News and AnalysIs for

With investors walking away from Colombian oil and gas stocks but interest rates low and companies still upbeat about their prospects, there have been a number of announcements about new debt issues and debt intentions. Other less conventional uses of cash like share buybacks have also become more prevalent.

As reported by Dinero, by February this year the stock-market capitalization of the companies listed on the Colombia Stock Exchange (BVC) increased by 6% compared to February of 2012, going from US$248B to US$263B. This even though capitalization declined compared to January this year, when it was US$273B.

As always, the Pacific Rubiales conference call was full of interesting insights on the company and the industry. The Quifa arbitration result warranted an US$62M provision to Pacific Rubiales Net Income and drew multiple questions from analysts. The company had not adjusted its reserves but said it only amounted to “4 or 5Mbl”, some 4 or 5% of Quifa 2P reserves and so a much smaller percentage of overall 2P reserves. But results of the STAR (Synchronized Thermal Additional Recovery) test in Quifa SW drew almost as much interest considering its potential for increasing production without additional water cut. Results, by contrast, got less attention even though both Revenues and EBITDA hit records. Another stunning fact was that production was up 30% in 2013 versus December of 2012.

After a few mixed and a few very disappointing 4Q12 results presentations this quarter, it is nice to read one that seems like good news from beginning to end. The graph tells the story with Parex production increasing sequentially from 2Q12 onward, with the trend continuing into 2013. That kind of growth pulls revenue and profit along for the ride.

Gulfsands is a newcomer to the Colombian scene having entered the market really only a few weeks ago when the blocks it won at the 2012 Round last October were finally signed, sealed and delivered by the National Hydrocarbons Agency (ANH). The company operates principally in the Middle East and North Africa with properties in Morocco, Tunisia and Syria. It recently updated its investor presentation to reflect the assignment of the blocks in Colombia.

Business magazine Dinero reports that 500 truckers threatened to go on strike and, to avoid it, asked companies like Ecopetrol and Pacific Oil Tech help them to find a solution to the problems that left them paralyzed in the Cartagena free trade zone, fact that made them lose about US$800 a day per truck.

It has been widely reported in the Colombian press that the arbitration commission has found in favor of Ecopetrol in its dispute with Pacific Rubiales. The result is an increase in Ecopetrol’s participation in the Quifa field, Pacific Rubiales’ second largest from the point of view of both reserves and production. This Portafolio article suggests that the wrangling is not over since the arbitrators declared they were not able to order Pacific to pay Ecopetrol the accumulated back payments. Pacific’s lawyer Nestor Humberto Martínez also spoke the newspaper about potential court action.

The ‘Qifa case’ has acquired a life of its own. This lawsuit between Pacific Rubiales and Ecopetrol turns on a clause that triggers an increase in Ecopetrol’s participation once production hits a certain level. The fight is over whether the trigger is defined by total production or just Pacific Rubiales’ net production. So much has been published on such little understanding that a number of ‘myths’ have arisen that Pacific has gone public to deny.

Interoil, operator of a number of Colombian oil blocks got approval from its shareholders to raise US$35M from existing and other investors. The equity is necessary to meet the requirements of bondholders to restructure and extend the company’s debt. The equity will be raised through a crash private placement that will close March 13, 2013. According to a company presentation, Interoil had US$97M of debt and US$10M in cash as of December 31, 2012 and it is using all of the proceeds from production in Peru and Colombia to pay for its debt. It is unable to invest in expanding production because of the debt load.

Ecopetrol continues its publicity campaign about local employment and procurement. This time it is the turn of employment, highlighting how many jobs the company creates and how many are filled with local people. With local hiring being a developing community issue, this Ecopetrol press release is timely. Translated and with commentary by Hydrocarbons Colombia.