Pacific Rubiales reports US$23.8M Q4 loss, unfavourable arbitration; stock falls

TORONTO – Pacific Rubiales Energy Corp. shares fell more than five per cent Thursday after the natural gas and crude oil producer announced a fourth-quarter loss and an unfavourable arbitration decision related to its operations in Colombia.

If the decision becomes enforceable, the company might have to divert 10 per cent of its share of future production from a Colombian oil and gas field for 20 months to compensate Ecopetrol, a major Colombian energy company.

As a result, Pacific Rubiales recorded a provision in its 2012 financial report that reduced its net income by $61 million, or about 10 per cent of what it would been without the arbitration decision.

On the Toronto Stock Exchange, Pacific Rubiales shares (TSX:PRE) closed down $1.39, or 5.61 per cent, at $23.40. More than 4.2 million shares changed hands, up sharply from the issue’s usual daily volume of some 867,000 shares.

The Toronto-headquartered company, which reports in U.S. dollars, had a $23.8 million net loss in the fourth quarter, equal to eight cents per diluted share.

That compared with a year-earlier profit of US$80.8 million of 28 cents per share.

Revenue rose slightly to US$1.05 billion from US$1.01 billion.

The company said it was evaluating alternatives after losing the contract dispute.

The arbitration decision, rendered Thursday, said a pricing formula should be calculated on 100 per cent of the production of the Quifa SW field, instead of just Pacific Rubiales’ 60 per cent share.

The contract assigns additional production to Ecopetrol and decreases Pacific Rubiales share according to the high-prices clause.

However, the arbitration panel expressly denied Ecopetrol’s demand for an order for Pacific Rubiales to deliver the associated volumes of hydrocarbons as a result of its interpretation of the formula.

“The arbitration decision is not yet firm nor does it provide enforceable remedies against the company,” Pacific Rubiales said.

The decision would require Pacific Rubiales to deliver almost 1.4 million additional barrels of oil to Ecopetrol, representing Ecopetrol’s additional share in Quifa SW production from April 3, 2011, to December 31, 2012.

Such production would be delivered in kind from future production out of 10 per cent of its daily net share of production of the Quifa SW field — approximately 2,270 barrels per day over a 20 month period.

As a result, the company’s year-end financials show a US$61 million negative impact reducing full-year 2012 net income by 10 per cent to US$528 million or $1.74 per diluted share from $589 million or $1.97 per diluted share.