(MENAFN- ProactiveInvestors) Following the release of its fourth quarter and 2014 results Pacific Rubiales () had its rating increased by Dundee Capital Markets to "neutral" from "sell" while the company's price target was also boosted on the back of a positive surprise in unit operating costs.
Shares climbed 4.5 percent to C$2.77 in Toronto on Thursday afternoon.
"Whilst top-line numbers were in line with expectations the clear positive surprise from 4Q14 was unit opex costs of $26.44/boe down 14% q-o-q well below our $29.50/boe forecast and prior management guidance of $28/boe" wrote Dundee analyst David Dudlyke.
Dundee said that such progress bodes well for the heavy oil producer meeting its 2015 unit operating cost target of $25.60 per barrel of oil equivalent (boe) just 3 percent below that of the fourth quarter of 2014.
Meanwhile Pacific Rubiales' proven plus probable (2P) reserves were down 20 percent year-over-year at year-end 2014 standing at 560.5 million boe. The company said 2014 production was 64.3 million boe and it also took a 77.4 million boe writedown 90 percent of which was related to heavy oil assets.
But 2P net asset value was virtually unchanged at C$22.11 per share Dundee said despite the 20 percent reduction in reserves in line with the broker's estimates. This was due in part to better-than-expected cost reductions.
The company also increased liquidity fully drawing its $1 billion revolving facility and adding over $500 million to its current cash balance. Pacific Rubiales also suspended its dividend as of the first quarter releasing the company for an annualized outflow of $209 million while it reduced general and administrative expenses saving another $140 million per year.
The oil and gas producer also has assets on the block and has an indicative $200 million offer for a 30 percent share in Pacific Midstream. The company has also put its 41 percent stake of Pacific Infrastructure up for sale and is in talks with an oil major regarding the sale of its PNG upstream asset Dundee said.
Nevertheless Dudlyke noted that high debt remains. "If we include the growing working capital deficit – which will inevitably have to be addressed particularly in a year with lower capital spending and lower oil prices – then the company’s overall net debt (including working capital) now stands at $5.14 billion" he said.
"Given the high indebtedness the equity valuation remains finely balanced" the analyst added.
Dudlyke raised his price target on Pacific Rubiales to C$3.00 from C$2.00 previously while bumping up the rating to neutral. The new target is in line with Dundee's core 2P net asset value for Pacific Rubiales less net debt/working capital.
Pacific Rubiales’ core production assets are the Rubiales and Quifa heavy oil fields and the La Creciente gas field. Of recent the company has expanded its portfolio beyond Colombia to include acreage onshore Papua New Guinea and offshore Peru Guyana and Brazil.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.