ALFA, S.A.B. de C.V. ("ALFA") and Harbour Energy Ltd. ("Harbour Energy") commented on their proposed acquisition of Pacific Rubiales Energy Corp. (TSX – PRE) (BVC – PREC) ("Pacific Rubiales" or the "Company").

The ALFA and Harbour Energy offer for Pacific Rubiales was agreed to following an in-depth technical, operational and financial review of the Company over a period of several months and involving over 100 technical and financial experts

Our offer of CAD$6.50 is full, fair and final

The offer represents an 81% premium to shareholders as compared to the 30 day volume weighted average price prior to the announcement date

The offer is a 70% premium to the Bloomberg Analyst Consensus price target of CAD$3.82 at the time of the transaction announcement

The Pacific Rubiales board of directors unanimously recommends the offer to the shareholders

Fairness opinions by three reputable financial institutions conclude the offer is fair to shareholders, other than ALFA, from a financial point of view

The offer is at the high end of the CAD$3.13 to $7.00 valuation from an independent valuator engaged by the Independent Committee

The valuation is unanimously supported by the 14 research analysts with current research reports on the Company

ALFA and Harbour Energy have already received overwhelming approval from debtholders holding over $5 billion of debt, indicating their support for the transaction

ALFA and Harbour Energy are disappointed with the ISS recommendation for shareholders to vote against our proposed transaction and disagree with the conclusions presented in their report

No credible counteroffer, including from the O'Hara Group, has emerged even after the ALFA/Harbour Energy transaction was publically disclosed without deal protection on May 5, 2015

As a shareholder, ALFA is seriously concerned there is no credible alternative to this transaction and will be forced to seek alternative JV partners for Mexico if the transaction is not completed

ALFA and Harbour Energy reiterate that the offer is full, fair and final

ALFA and Harbour Energy have an agreement with Pacific Rubiales whereby Harbour Energy and ALFA will acquire all of the issued and outstanding common shares of Pacific Rubiales not already owned by ALFA (or held by the Company in treasury) for CAD$6.50 per share in cash by way of a Plan of Arrangement under the Business Corporations Act (British Columbia) (the "Arrangement"). This agreement contains customary terms and conditions, including customary "deal protections", that were negotiated as part of the overall purchase price that ALFA and Harbour Energy agreed to pay. The Arrangement is scheduled to be considered by Pacific Rubiales shareholders at a special meeting to be held on July 7, 2015.

Certain shareholders calling themselves the "O'Hara Group" and led by Alejandro Betancourt López, the Chief Executive Officer of Derwick Associates, a Venezuelan company, have publicly indicated opposition to the Arrangement. In addition, Institutional Shareholder Services Inc. ("ISS") recently recommended that shareholders vote against the proposal. ALFA and Harbour Energy are disappointed by the negative recommendation by ISS and disagree with its analysis. We believe it is important to explain our viewpoint on the assertions of the O'Hara Group and conclusions of ISS.

We believe that the Board of Pacific Rubiales conducted an appropriate process.

ALFA and Harbour Energy requested an exclusive negotiating period with the Company in February 2015, but were not granted exclusivity until May 5, 2015. Until that point and at any point before the definitive agreement was signed on May 20, 2015, any interested bidder could have made an offer for the Company without triggering any termination fee. ALFA/Harbour Energy were only granted exclusivity after agreeing to a 30% increase to our proposed offer price and the removal of other proposed conditions. The offer was then subject to review by the Independent Committee of the Board of Directors of Pacific Rubiales.

In fact, Pacific Rubiales had been "in play" for months before our transaction was announced, starting no later than October 2014 when there was first public speculation that ALFA would make a bid for the Company. Furthermore, there were no deal protection provisions in place during the period between May 5, 2015, when the offer price of CAD$6.50 was publicly announced, and May 20, 2015, the date on which the Arrangement Agreement was entered into between ALFA/Harbour Energy and Pacific Rubiales. Despite this, the Company has disclosed that it received no third party proposals prior to entering into the agreement with ALFA/Harbour Energy. The O'Hara Group were shareholders in the Company at that time and yet did not themselves come forward with an alternative proposal or even discuss with Pacific Rubiales the possibility of an alternative transaction.

All of this contradicts assertions made by the O'Hara Group in their press releases and dissent circular that the "termination fee has been a major impediment to the O'Hara Group and others proposing an alternative transaction." It also goes against ISS's suggestions that other parties were not afforded the opportunity to make an offer for the Company. ALFA and Harbour Energy strongly disagree with ISS's assertion that there was an insufficient market check during the sale process of Pacific Rubiales or that the termination fee pursuant to the Arrangement (which equates to only CAD$0.37/share) has impeded other potential offers from coming forward.

The CAD$6.50 per share offer price is full, fair and final.

The CAD$6.50 per common share purchase price agreed to by ALFA and Harbour Energy has been unanimously approved by the Board of Directors of Pacific Rubiales, represents a very substantial premium to the unaffected share price of Pacific Rubiales, was determined to be fair to shareholders from a financial point of view by three reputable financial advisors retained by Pacific Rubiales, and is at the high end of the CAD$3.13 to CAD$7.00 per share valuation range reached by GMP Securities L.P., a financial advisor to the Independent Committee of the Board of Pacific Rubiales. ALFA and Harbour Energy believe the offer to be full and fair and therefore do not intend to increase the consideration offered under the Arrangement.

Our price of CAD$6.50 per share is the result of months of technical, operational, financial, tax and legal due diligence conducted by ALFA and Harbour Energy's more than 100 internal and external experts. Our view of the value of Pacific Rubiales reflects a thorough analysis of the Company's production rates and operating costs as well as our own views (supported by technical experts) on reserves, the viability of certain oil field development programs, available cash flow in the current oil price environment and expert expectations for oil prices over the coming several years.

The O'Hara Group and ISS have both made reference to a statement by the Company's management in March 2015 that suggested a Company value of CAD$9.22 per share. This statement was a management estimate, largely based upon 2014 year-end estimates of reserves and oil price forecasts. Oil price forecasts are now significantly lower. The lower oil price not only affects the revenue per barrel of oil the Company will produce but also the number of barrels to be produced as we believe that many planned drilling and development projects are not viable in the current circumstances. Furthermore, as the Company already has a very high level of debt, it is unlikely to be in a position to borrow money to fund future projects or acquisitions to replace declining production.

The most relevant metric for oil and gas upstream transactions that the O'Hara Group never discusses is the implied dollar paid per "proved plus probable barrel of oil equivalent reserves" (adjusted, as necessary, for non-upstream assets). We are offering approximately $12 per barrel of oil equivalent, which is a 16% premium to such amount in Repsol's recent acquisition of Talisman Energy Inc. This is despite the fact that 65% of Talisman's operations are in lower risk operating environments in OECD countries, and despite the fact that nearly half of the Company's reserves are lower-margin heavy oil barrels. Despite the O'Hara Group's claim that the deal compares favorably only to micro-cap Colombian transactions, the 16% premium to the Talisman transaction clearly indicates the value offered is more than fair. In addition, the consensus equity analyst 12-months price target at the time of the transaction announcement (based on recently updated research reports as reported by Bloomberg) was CAD$3.82; our offer represents a 70% premium to this consensus view.

As is well known by all stakeholders in the Company, Pacific Rubiales' current level of production is expected to fall by approximately 35% with the expiration of the Rubiales Field concession in June 2016. While the Company has substantial reserves, a large portion is undeveloped heavy oil that requires a significant amount of capital to convert into revenue-generating production. Similarly, converting exploration assets into reserves and production is extremely risky by its nature and also capital intensive. Furthermore, while the opportunities in Mexico are of great interest, the Company must compete against other bidders to secure these, and will require additional capital to invest in converting any successfully acquired opportunities into production. Given the Company's high level of debt, the outlook for oil prices and the upcoming loss of 35% of its existing production, our view is the Company will be extremely challenged in its current state to have sufficient funds to pursue these investment opportunities.

ALFA/Harbour Energy recognize this funding challenge and put forward a plan to address it as part of our acquisition proposal which includes a condition requiring the Company's bondholders and lenders to waive any change of control clauses and revise their debt covenant restrictions. The bondholders and banks have, in fact, already agreed to these terms which, if the transaction is consummated, will provide the Company with an improved opportunity to invest in necessary development opportunities. On the other hand, the O'Hara Group has not put forward a proposal to address the Company's liquidity and ability to fund growth. If they do come forward with an alternative proposal, we are skeptical that the O'Hara Group could secure similar consents from the Company's bondholders and lenders, due to reasons outlined below.

The O'Hara Group refers to our offer as "opportunistic" and the ISS report points to a "recent partial rebound in oil prices" as a basis for its recommendation for shareholders to vote against our proposal. In reality, spot oil prices have declined approximately 5% and, more importantly one-to-three-year average forward prices are down approximately 4% to 6% since the announcement of the transaction.

The ISS recommendation puts it at odds with many large Pacific Rubiales shareholders who tell the Company they support our all-cash offer and the immediate certainty it provides. It also puts ISS at odds with the views of the equity research community which has strongly endorsed the proposed transaction. In fact, all 14 equity research analysts that published updated reports since June 20 have price targets equal to or lower than our offer.

The 81% premium implied by our offer is measured relative to the 30-day volume weighted average price prior the announcement of exclusive discussions between the Company and ALFA/Harbour Energy on May 5, 2015 (when the price of CAD$6.50 was publicly acknowledged). The implied premium is even higher, in fact in excess of 100%, if we were to eliminate the estimated impact of renewed takeover speculation between mid-April and the early-May announcement when the trading volume in the Company's shares was nearly 60% higher than average.

The O'Hara Group has not provided a credible alternative transaction or plan.

The "O'Hara Group" is led by Alejandro Betancourt López, the Chief Executive Officer of Derwick Associates, a Venezuelan engineering, procurement and construction company. While the O'Hara Group has raised a number of questions about the Company and the proposed transaction, it has avoided answering important questions about its own business dealings, intentions with respect to Pacific Rubiales, its experience in the oil and gas industry and corporate governance track record, its sources of funds, and the manner in which it acquired its shares in the Company.

Significant questions have also been raised in the media and in civil lawsuits about the backgrounds of Betancourt and Derwick Associates, including reports from respected publications such as the Wall Street Journal. Furthermore, we agree with Pacific Rubiales' allegation that the O'Hara Group breached Canadian securities laws when accumulating its shareholdings of Pacific Rubiales and support the application recently made by the Company with the Supreme Court of British Colombia. The O'Hara Group did not disclose that Mr. Betancourt was the beneficial owner of its interest in Pacific Rubiales, in apparent contravention of Canadian securities laws, until after it had purchased 19.82% of Pacific Rubiales.

Neither the O'Hara Group nor Mr. Betancourt has any significant public track record of managing oil and gas assets, let alone a large multinational oil and gas company such as Pacific Rubiales. On the other hand, ALFA and Harbour Energy are well situated to enhance the value of the Company by supporting the Company's leadership and expansion into new markets such as Mexico. ALFA is one of the largest and most successful corporate entities in Mexico. Harbour Energy is managed by EIG, a globally recognized firm that specializes in private investments in energy and energy-related infrastructure, and is led by a long-time Royal Dutch Shell senior executive, Linda Z. Cook.

Summary Conclusions

"The O'Hara Group only became shareholders of the Company in the days and weeks before our offer became public and have no known track record of managing or investing in oil and gas companies," said Linda Z. Cook, Chief Executive Officer of Harbour Energy. "The vehemence with which they insist our 81% premium offer undervalues the Company is curious given that the recent view of industry expert research analysts is that the offer is fair. The O'Hara Group have offered no competing offer to our proposal nor any credible plan to address the Company's leverage or future capital requirements to replace the impending loss of oil production from the Rubiales Field. Basing their value argument on the past share price of Pacific Rubiales when oil prices had been over or around $100 per barrel for three years and when there was speculation of a takeover does not compare to the field by field technical analysis that ALFA and Harbour Energy have undertaken over the past several months. Our in-house and external technical staffs have thoroughly vetted the current assets and future prospects of the Company. As such, our offer of CAD$6.50 per share and its 81% premium is both fair and final."

Alvaro Fernandez, the President of ALFA, stated that: "There are a number of attractive energy opportunities in Mexico, and ALFA intends to pursue them. We have been approached by numerous other parties to partner in the Mexican energy industry. If our proposed transaction with Pacific Rubiales at CAD$6.50 per share is rejected by its shareholders, we will have no choice but to pursue opportunities in Mexico with other partners. We will also thoroughly analyze our options with respect to our investment in Pacific Rubiales, including the divestment of our current stake in the Company in the event a consideration higher than ours is offered by an alternative offeror."

About ALFA

ALFA is the largest independent producer of complex aluminum components for the automotive industry in the world, and one of the world's largest producers of polyester (PTA, PET and fibers). In addition, it leads the Mexican market in petrochemicals such as polypropylene, expandable polystyrene and caprolactam. ALFA is an important producer, marketer and distributor of highly recognized branded foods in Mexico, the United States and Europe, as well as a leading provider of information technology and telecommunications services for the enterprise segment in Mexico. ALFA also operates in the hydrocarbons industry in Mexico and the United States. In 2014, ALFA reported revenues of Ps. 229,226 million (U.S. $17.2 billion), and EBITDA of Ps. 27,116 million (U.S. $2 billion). Currently, ALFA has manufacturing facilities in 25 countries and employs more than 70,400 people. ALFA's shares are quoted on the Mexican Stock Exchange and on Latibex, the market for Latin American shares of the Madrid Stock Exchange.

About Harbour Energy

Harbour Energy is an energy investment vehicle formed by EIG Global Energy Partners ("EIG") and the Noble Group ("Noble") to pursue control and near control investments in high-quality upstream and midstream energy assets globally. Harbour Energy is externally managed by EIG. EIG specializes in private investments in energy and energy-related infrastructure on a global basis and had $14.8 billion under management as of March 31, 2015. During its 33-year history, EIG has invested over $21.4 billion in the sector through more than 300 projects or companies in 35 countries on six continents. Noble manages a portfolio of global supply chains covering a range of energy and other commodity products from over 140 locations and employing more than 70 nationalities. Noble was ranked number 76 in the 2014 Fortune Global 500.

Source: www.youroilandgasnews.com

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