Pacific Exploration Reaches Forbearance Deal With Certain Noteholders -- 2nd Update
February 19 2016 - 3:46PM
Dow Jones News
By Carolyn King and Ben Dummett
Pacific Exploration & Production Corp. on Friday said it had
reached a forbearance agreement with holders of about 40% of its
$4.1 billion in senior notes, giving the troubled
Canadian-Colombian oil company until March 31 to restructure its
balance sheet.
The deal follows Pacific Exploration's decision not to make
scheduled interest payments due on the notes last month and to seek
restructuring alternatives. Analysts said that move was possibly a
sign the firm was running low on cash.
Washington, D.C.-based energy-investment firm EIG has made an
offer to Pacific Exploration's noteholders, offering 16 cents on
the U.S. dollar and saying it will overhaul the company's
management and sell off assets if its offer to noteholders is
successful.
Prices of the oil company's notes remain under pressure,
recently trading a few pennies below EIG's offer.
The extension deal with the noteholders "should allow the
company additional time to continue working with the independent
committee of the board of directors, the company's financial and
legal advisers as well as its lenders and the noteholders to come
to a consensual and comprehensive restructuring of the company's
balance sheet," Pacific Chief Executive Ronald Pantin said.
The company also said Friday that it had reached forbearance
agreements with its bank lenders in connection with more than $1.4
billion of debt.
Pacific Exploration, which is listed on the Toronto Stock
Exchange but has most of its assets in Colombia, has been hit hard
by falling oil prices and a lack of new discoveries. After trading
around 34 Canadian dollars (about $25) in 2011, the company's
shares recently changed hands at 68 Canadian cents on the Toronto
Stock Exchange.
EIG and its subsidiary Harbour Energy first approached the
company's noteholders in January, offering 17.5 cents on the
dollar. EIG later lowered the offer, citing low oil prices and
Pacific Exploration's deteriorating financial condition.
Pacific Exploration has cut costs and tried to sell assets to
offset the blow from low oil prices, but even with the forbearance
agreement it isn't clear the company can survive if oil prices stay
at current levels of around $30 a barrel, said Klaus Spielkamp,
head of fixed-income sales at Bulltick Capital Markets, a
Miami-based investment bank focused on Latin America.
"I don't believe they have a plan for oil trading at $30 or
below $30 a barrel," he said. In New York, crude was recently at
$29.50 a barrel.
A Pacific Exploration spokesman declined to comment beyond the
company's statement.
In the statement, the company said it would use the extension
period to continue to work with its creditors and "to formulate a
comprehensive plan to address the current oil price environment and
ensure the long-term viability of its business." It said it
continues to operate normally and to pay its bills on time.
Write to Carolyn King at carolyn.king@wsj.com
(END) Dow Jones Newswires
February 19, 2016 15:31 ET (20:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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