NEW YORK--(BUSINESS WIRE)--Fitch Ratings sees Alfa, S.A.B. de C.V. (Alfa; IDR 'BBB-', Outlook Stable) and Harbour Energy Ltd.'s (Harbour Energy) potential acquisition of Pacific Rubiales Energy Corp. (Pacific Rubiales; IDR 'BB', Outlook Negative) as a credit-neutral to marginally positive event for Pacific Rubiales.
Alfa and Harbour Energy's acquisition of Pacific Rubiales would be positive for the company's credit quality if the company receives a capital injection aimed at improving its capital structure following the acquisition, which could help stabilize the rating. The new shareholder group could also help Pacific Rubiales lower its business risk by facilitating its entrance into Mexico.
Pacific Rubiales' credit quality will continue to be pressured in the near term absent a capital injection; the recent reduction in capex due to low prices may impair the company's ability to replace production from the Piriri-Rubiales field with new fields. The Piriri-Rubiales field, which accounted for 35% of the company's 2014 production, reverts back to Ecopetrol in the middle of 2016.
The acquisition could prove negative for Pacific Rubiales' creditors if the new owners are not able to retain current management. This could prove challenging for the new owners, as they may not be able to maintain the highly variable management compensation strategy that existed after the company is taken private. Management's recognized expertise in heavy oil exploration and production has allowed it to grow output rapidly in recent years. Pacific Rubiales has reported in excess of USD200 million of stock-based compensation expenses over the past five years.
On May 5, 2015, Pacific Rubiales announced it entered into an exclusive discussion with Alfa and Harbour Energy in which the two would acquire the company for approximately USD1.7 billion. Alfa currently owns approximately 19% of Pacific Rubiales equity. This transaction is still subject to Pacific Rubiales' board of directors' approval.
Additional information is available at 'www.fitchratings.com'.
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