Pacific Rubiales to Purchase Colombia-Focused PetroMagdalena

Pacific Rubiales Energy Corp. (PEGFF, PRE.T), a Toronto-based oil firm with operations in Colombia, has agreed to purchase PetroMagdalena Energy Corp. (ALNGD, PMD.V), a smaller crude producer, for about C$253 million (US$243.5 billion), the companies said Tuesday.

Pacific Rubiales, which ranks as Colombia's second-largest oil producer, will pay C$1.60 for each PetroMagdalena share. Pacific Rubiales said it plans to pay for the acquisition by using existing cash on hand.

Pacific Rubiales said in a statement that its board of directors, along with PetroMagdalena's, already have unanimously approved the acquisition. 

PetroMagdalena, which also operates in Colombia, said in its first-quarter earnings report it expects to produce between 4,300 and 4,700 barrels of oil equivalent per day on average in 2.012.

Pacific Rubiales has been successful at turning the once-neglected Rubiales field into Colombia's largest. The firm produces roughly a quarter of Colombia's oil output, which is expected to reach 1 million barrels a day this year.

Colombia has posted a sharp increase in oil production in recent years as the military has pushed a decades-old insurgency deeper into the jungle, allowing oil companies to boost their exploration efforts and invest in upgrading production in operating fields.

Pacific Rubiales was one of the first companies to reap the dividends of the improved security. 

The firm, led by former high-level executives in Venezuela's state oil company, Petroleos de Venezuela SA (PDVSA), brought to Colombia new technologies and expertise that was missing in the country for extracting its heavy crude.

PetroMagdalena was seen by many oil-industry observers as a likely candidate to follow on Pacific Rubiales's footsteps in Colombia. 

Its management also had experience working with PDVSA, and until January 2.011 the company was led by Luis Giusti, a former head of PDVSA.

The company, however, was forced last year to restate its 2.010 production figures from 4,300 barrels of oil equivalent per day to 2,600 barrels of oil equivalent per day. 

That prompted the company's shares to plummet and Mr. Giusti to resign.

The company then engaged in a restructuring plan and changed its name from the original Alange Energy Corp. to PetroMagdalena.

Shares of Pacific Rubiales were up 2.4% to C$26.13 in recent trading Tuesday afternoon, while PetroMagdalena's shares rose 25.6% to C$1.57.