O'Hara Administration Co., S.A.

June 18, 2015 10:06 ET

O'Hara Issues Proxy Circular and Letter to Pacific Rubiales Shareholders

Fellow Minority Shareholders Urged to Vote the YELLOW Form of Proxy AGAINST the Opportunistic and Heavy-Handed ALFA/Harbour Offer

PUNTA PACIFICA, PANAMA--(Marketwired - June 18, 2015) - O'Hara Administration Co., S.A. ("O'Hara") and its joint actors holding 62,639,710 common shares ("Common Shares") of Pacific Rubiales Energy Corp. ("Pacific Rubiales" or the "Company"), representing approximately 19.82% of the issued and outstanding Common Shares, have filed and mailed a proxy circular (the "Circular") and a YELLOW form of proxy ("Proxy"). The Circular and Proxy have been filed on Pacific Rubiales' profile on SEDAR at www.sedar.com and are also available at www.savePRE.com.

O'Hara urges fellow minority shareholders of Pacific Rubiales to join it in voting AGAINST the arrangement whereby ALFA and Harbour are proposing to acquire all of the issued and outstanding Common Shares of Pacific Rubiales for C$6.50 per share (the "Proposed Arrangement").

If you have previously voted in favour of the Proposed Arrangement and now wish to protect your investment by voting AGAINST the opportunistic and heavy-handed offer, you can do so by revoking your previous proxy and voting AGAINST the Proposed Arrangement by simply voting the YELLOW form of proxy now. The later dated proxy is the one that will be voted at the special meeting of shareholders.

In a letter to fellow minority shareholders in the Circular, O'Hara outlined the reasons why it will be voting AGAINST the Proposed Arrangement. The letter in its entirety follows:

Dear Pacific Rubiales Shareholder,

O'Hara Administration Co., S.A. ("O'Hara") calls upon its fellow minority shareholders of Pacific Rubiales Energy Corp. ("Pacific Rubiales") to VOTE AGAINST the special resolution (the "Arrangement Resolution") to approve an arrangement whereby ALFA S.A.B. de C.V. ("ALFA") and Harbour Energy Ltd. ("Harbour") are proposing to acquire all of the issued and outstanding common shares ("Common Shares") of Pacific Rubiales for C$6.50 per share (the "Proposed Arrangement"). O'Hara believes that the Proposed Arrangement undervalues the Common Shares, is opportunistic given current market volatility, inappropriately incentivizes management at the expense of the minority shareholders and is not in the best interests of the minority shareholders.

O'Hara and its joint actors hold 62,639,710 Common Shares, representing approximately 19.82% of the issued and outstanding Common Shares.

O'Hara intends to VOTE AGAINST the Arrangement Resolution and urges its fellow minority shareholders of Pacific Rubiales to VOTE AGAINST the Arrangement Resolution using only the YELLOW form of proxy for the following reasons:

The Proposed Arrangement Undervalues the Common Shares

  • The offer of C$6.50 per share under the Proposed Arrangement does not represent the maximum price attainable.

  • The offer of C$6.50 per share under the Proposed Arrangement does not accurately value Pacific Rubiales' current assets or the long-term value that O'Hara believes Pacific Rubiales can capture in the future.

  • The President and Executive Director of Pacific Rubiales provided a valuation of C$9.22 on Pacific Rubiales' Q4 2014 earnings call held on March 18, 2015, when oil prices were significantly lower.

  • The independent valuation from GMP Securities underpinning the ALFA/Harbour Offer, that is supported by management, neglects key data points and is unreliable.

  • There are long-standing relationships between GMP Securities, Pacific Rubiales and its directors.

The Proposed Arrangement is Opportunistic

  • There is no immediate necessity to sell Pacific Rubiales as it has over US$860 million in cash and it is showing operational improvements that are not reflected in the market price and/or current valuation.

  • The 52-week high for the Common Shares prior to the date that the Proposed Arrangement announced was C$23.86.

  • The offer of C$6.50 per share represents a 73% discount to the 52-week high.

  • Pacific Rubiales is trumpeting the fact that the offer of C$6.50 per share under the Proposed Arrangement constitutes an 81% premium to the 30-day volume weighted average price of the Common Shares on the Toronto Stock Exchange as at May 4, 2015. While this statement is factually accurate, the Proposed Arrangement does not truly provide shareholders of Pacific Rubiales with a "premium" for their Common Shares.

  • ALFA and Harbour are taking advantage of the precipitous drop in energy prices to purchase Pacific Rubiales at the low end of the cycle.

The Board and Management are Delivering Pacific Rubiales to ALFA and Harbour

  • In addition to not conducting a comprehensive auction or market check, the board has done everything it can to dissuade a higher offer.

  • The termination fee under the Proposed Arrangement is US$100 million or 5.94% of the equity value of the transaction.

  • While termination fees are standard in transactions of this nature, such fees typically amount to approximately 2.5-3.5% of the equity value.

  • The termination fee agreed to by Pacific Rubiales as part of the Proposed Arrangement makes it significantly less likely that shareholders of Pacific Rubiales will be presented with an alternative transaction.

  • Shareholders should be entitled to have possible alternative offers made available to them in order to make a decision on whether the Proposed Arrangement is in their best interests.

  • While O'Hara continues to evaluate the possibility of an alternative transaction, the termination fee has been a major impediment to O'Hara and others proposing an alternative transaction.

  • The board has agreed to reduce Pacific Rubiales' liquidity by more than US$18.5 million in order to pay for aggregate consent solicitation fees to noteholders to pave the way for ALFA and Harbour to acquire Pacific Rubiales.

  • By agreeing to one of the earliest possible meeting dates, the board has made it difficult for other interested parties to prepare opposing bids.

The Proposed Arrangement Brings Significant Benefit to the Board and Management of Pacific Rubiales, but Does Not Maximize Shareholder Value

  • If the Proposed Arrangement is consummated, directors and officers of Pacific Rubiales (including members of the special committee of independent directors that evaluated the offer) will receive aggregate cash payments of approximately C$116 million or C$0.46 per minority share and, unlike other shareholders, some of them will be allowed to invest this money in the continuing company.

  • Management's employment contracts have been amended to give them these payouts even if they remain employed by the Company.

  • This reward is given to them for presiding over a sharp decline in value.

  • The consummation of the Proposed Arrangement is in the best economic interest of the directors and officers of Pacific Rubiales, but not necessarily in the best interests of minority shareholders.

ALFA and Harbour Have Not Indicated That They Will Waive the Dissent Rights Condition

  • A condition precedent to the obligations of ALFA and Harbour under the Proposed Arrangement is that the aggregate number of Common Shares in respect of which dissent rights have been validly exercised and not withdrawn not exceed 5% of the issued and outstanding Common Shares (the "Dissent Rights Condition").

  • O'Hara has indicated that if the Arrangement Resolution is approved, it will exercise dissent rights.

  • The Dissent Rights Condition may only be waived by ALFA and Harbour, but ALFA and Harbour have not indicated that they intend to do so.

  • If ALFA and Harbour truly believe that the offer of C$6.50 per share under the Proposed Arrangement fully values Pacific Rubiales, they would have no reason not to waive the Dissent Rights Condition.

O'Hara urges its fellow minority shareholders of Pacific Rubiales to VOTE AGAINST the Arrangement Resolution.

Thank you for your consideration and support.

Sincerely,

Orlando J. Alvarado, O'Hara Administration Co., S.A.

VOTE AGAINST THE ALFA/HARBOUR OFFER ON THE YELLOW FORM OF PROXY

O'Hara urges fellow minority shareholders of Pacific Rubiales to protect their investment and VOTE AGAINST the opportunistic and heavy-handed ALFA/Harbour offer using the YELLOW form of proxy. Vote online today at www.savePRE.com or fax/courier the YELLOW form of proxy to D.F. King so that it arrives no later than 2:00 p.m. (Vancouver time) on Thursday, July 2, 2015. If you have previously voted in favour of the Proposed Arrangement and now wish to protect your investment by voting AGAINST the opportunistic and heavy-handed offer you can do so by revoking your previous proxy and voting AGAINST the Proposed Arrangement by simply voting the YELLOW form of proxy now. The later dated proxy is the one that will be voted at the special meeting of shareholders.

If you have any questions or require voting assistance, please call D.F. King toll-free at 1-866-822-1238 or visit www.savePRE.com for further details.

Contact Information

  • Voting assistance and related inquiries:
    D.F. King, 320 Bay Street, Toronto, Ontario, M5H 4A6
    North American Toll Free Phone: 1-866-822-1238
    Banks, Brokers and Collect Calls: 1-201-806-7301
    1-888-509-5907 (FAX)
    inquiries@dfking.com
    www.savePRE.com

    Investors: Orlando J. Alvarado
    O'Hara Administration Co., S.A.
    Trump Ocean Club, Punta Colon Street, BL 313, 3rd Floor
    Punta Pacifica, Panama
    +917 434 5615
    oalvarado@oharafinancial.com

    Media:
    Joel Shaffer
    Longview Communications
    Tel: 416-649-8006