Frontera Energy to Fully Acquire Pacific Midstream by Buying Up Outstanding Shares for $225 Million USD
Canadian oil company Frontera Energy Corporation (TSX: FEC) has signed an agreement to fully acquire Pacific Midstream Limited by purchasing the remaining 36.36% ownership stake in the company held by International Finance Corporation.
The purchase will be completed with $225 million USD in cash that will be paid in installments over a 36-month period, plus accrued interest over unpaid amounts, according to Frontera Energy.
Now, with 100% control of Pacific Midstream, the Toronto-based company, which was formerly known as Pacific Rubiales with extensive operations in Colombia, says it will “pursue initiatives related to the reduction of, and unwinding of, various transportation commitments, including fixed rate take-or-pay arrangements.”
Gabriel de Alba, chairman of Frontera, called the move a “very strategic acquisition” that will support the firm’s push “to reduce our corporate transportation costs, provide long-term transportation flexibility, and reduce fixed-cost transportation obligations.”
After closing on the deal, Pacific Midstream will a “100% consolidated entity of Frontera” that includes the following entities: Petroelectrica de los Llanos (which it has a 100% ownership stake in), Oleoducto Bicentenario de Colombia S.A.S. (43% ownership), and Oleoducto de los Llanos Orientales S.A. (35% ownership).
The transaction will be subject to various considerations, said Frontera Energy in a statement. “The completion of the transaction,” said Frontera, “is subject to obtaining modifications to Frontera’s take-or-pay contracts, which are expected to reduce tariffs, and other customary conditions of closing. In addition, the consent of the company’s note holders and secured lenders is required to complete the transaction.