Oil driller vows to change ways after restructuring

Bloomberg

After emerging this week from one of the largest-ever energy-industry debt restructurings, Pacific Exploration & Production Corp. has a new ticker on the Toronto stock exchange and a new mantra: discipline.
The oil and gas producer will target profit rather than growing production at all costs, and limit its geographic focus to Colombia and Peru after divesting assets in Brazil and ditching expansion plans in Mexico, according to new Chairman Gabriel de Alba.
“We are resetting the business plan,” de Alba said in a telephone interview Thursday. “We are transforming the focus from a production orientation to one that is focused on sustainability of cash flow. Certainly profitability for the shareholders and discipline on capital allocation. Those are the main drivers.”
While the message of prudence over exuberance probably will be cheered by investors, it will be cold comfort to those who already lost everything.
Pacific failed to make interest payments on bonds in January and March before agreeing to a restructuring proposal put forward by Canadian private equity firm Catalyst Capital Group Inc. and creditors.
The deal, completed this week, reduced Pacific’s debt from $5.4 billion to $250 million, while large shareholders including Mexico’s Alfa SAB and Venezuela’s O’Hara Administration Co. lost millions and small Colombian investors lost everything. Competing restructuring proposals from Alfa and O’Hara were rejected.
Suspended since April, Pacific resumed trading in Toronto on Thursday under the ticker PEN CN, with shares rising to C$58. “The company is still undervalued,” de Alba said. “Compared to similar trading companies, there still is room to go.”
To ensure that happens, the driller has become cash-flow positive and will continue cutting costs and improving productivity at Colombian fields, he said. Pacific expects to increase production from 74,100 barrels a day now to an average of 84,000 barrels a day in the second half of next year. That compares with 154,800 at the end of last year, before its contract in the Rubiales field expired in June.