GTE to Buy PetroLatina for $525 Million
Oil and natural gas producer Gran Tierra Energy Inc.(GTE) said Friday it agreed to buy PetroLatina Energy Ltd. in a $525 million cash deal, widening its reach in Colombia by adding what it called a "prolific" production site to its portfolio.
PetroLatina is a private, independent exploration and production company with assets primarily in Colombia's Middle Magdalena basin. PetroLatina operates the Acordionero conventional oil field that it discovered in 2013. As of May, four wells have been drilled in the Acordionero field, one discovery exploration well and three follow-up appraisal wells.
Gran Tierra Chief Executive Gary Guidry said the transaction is an "opportunity in Colombia in terms of scale and upside potential, and will add a new core area for Gran Tierra in the prolific Middle Magdalena Basin."
Mr. Guidry was named CEO last year after Gran Tierra agreed to support board nominees proposed by activist investor West Face Capital Inc., which owned roughly 9.8% of Gran Tierra shares at the time. It now owns a roughly 5% stake, according to FactSet, making it the company's second largest shareholder.
West Face began its campaign for change contending that Gran Tierra's "high-risk, high-cost exploration strategy in Peru, Argentina, and Brazil" had failed, destroying shareholder value and bloating corporate costs. Gran Tierra, which is based in Calgary, Canada, has said it would focus on its core Colombian properties and scale back elsewhere.
The company said it would fund the PetroLatina acquisition through its current cash balance, existing credit facilities and a new $130 million debt facility, among other funding means. The purchase will consist of an initial $500 million payment at closing and a deferred payment of $25 million before the end of the year.
The deal, subject to closing conditions such as regulatory approval, is expected to close before Oct. 31.
Gran Tierra shares, which were inactive premarket, have climbed 44% in the past three months.
I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.
James Madison
