EIG Submits Binding Proposal to Acquire Pacific Exploration & Production Corporation

May 9, 2016

Recovery Value of At Least 15.4¢ per Dollar, a 67.1% Premium to Catalyst Proposal

Vastly Superior Solution to Stabilize Company, Including Additional $75 Million Capital Infusion and $400 Million “Cash Out” Offer

Pacific E&P to Benefit from EIG’s Operational Expertise and Financial Wherewithal

 

EIG Global Energy Partners today announced that EIG Management Company, LLC (on behalf of funds, accounts and companies managed by it, including Harbour Energy Ltd., collectively “EIG”) has submitted a binding proposal to provide debtor-in-possession financing to, and sponsor a restructuring of, Pacific Exploration & Production Corporation (TSX:PRE) (BVC:PREC) (“Pacific E&P” or the “Company”) pursuant to formal proceedings under the laws of Canada, Colombia, and the United States. The proposal, which expires on May 31, 2016, was submitted to Pacific E&P’s board of directors on May 7, 2016 and simultaneously provided to the Company’s Canadian court-appointed monitor.

EIG’s proposal represents a superior solution for Pacific E&P and its creditors, offering a significantly higher recovery value for creditors and a stronger balance sheet for the Company. Compared to the debtor-in-possession (DIP) financing proposed by The Catalyst Capital Group, EIG’s proposed $250 million DIP financing would convert into less equity of the reorganized Company than in the Catalyst proposal. Furthermore, EIG would contribute an additional $75 million for no further consideration to bolster the reorganized Company’s balance sheet and compensate it for the $25 million break fee payable in connection with the Catalyst proposal, with the remaining $50 million to be used as operational capital—a substantial benefit to the Company, its employees, and the Colombian economy. EIG’s proposal also provides $80 million in additional market notes to creditors, further enhancing their recovery. Collectively, these changes result in a recovery value for affected creditors that would be 67% higher than the recovery under the Catalyst proposal.

EIG’s proposal also allows existing shareholders (in addition to creditors) of Pacific E&P to participate in the transaction by funding a portion of equity in order to “cash out” creditors who prefer up to $400 million cash rather than equity as their form of recovery. Together with a fund to be established outside of the restructuring for the benefit of certain of the Company’s Colombian stakeholders if the EIG restructuring plan is successful, these features provide a meaningful opportunity for shareholders to participate in the value of the Company.

R. Blair Thomas, EIG’s Chief Executive Officer, said, “EIG’s binding proposal is undeniably superior and is clearly in the best interests of creditors, the Company and its other stakeholders. Under our proposal, creditors will realize the strongest available returns and the Company will benefit from EIG’s robust financial strength and operational expertise gained through decades of focused, long-term strategic investing in the global energy sector. Our proposal provides the best path forward for all stakeholders, including creditors, shareholders, employees, commercial counterparties and the communities and countries in which the Company operates. The numbers speak for themselves.”

The following table provides an overview of the vastly superior economic recovery provided by EIG’s proposal, which can be referenced here in its entirety.

 

Summary of Offers

 

 

 

 

($'s in millions unless noted)

 

EIG's
Revised
Offer

 

Catalyst /
Co-Chairman's
Offer

 

EIG's Revised
Offer $
Premium to
Catalyst Offer

 

EIG's Revised
Offer %
Premium to
Catalyst Offer

Sponsor Ownership Post Equitization

   

25.0

%

 

 

29.3

%

       

Creditor Ownership

   

62.5

%

   

58.2

%

       

Funding Creditor Ownership

   

12.5

%

   

12.5

%

       
               

 

Implied Equity Value

 

$

1,200

   

$

853

   

$

347

 

40.6

%

Post Restructuring Debt

 

 

330

 

 

 

250

 

       

Implied EV

 

$

1,530

   

$

1,103

   

$

427

 

38.7

%

               

 

Consideration:

               

Creditor Equity Recovery

 

$

750

   

$

497

         

Creditor Note Recovery

 

 

80

 

 

 

-

 

       

Total Creditor Recovery

 

$

830

   

$

497

   

$

333

 

67.1

%

Implied Dollar Recovery

 

$

0.154

   

$

0.092

   

$

0.062

 

67.1

%

               

 

Funding Creditor Equity Recovery

 

$

150

   

$

107

         

Funding Creditor Note Recovery

 

 

250

 

 

 

250

 

       

Total Funding Creditor Recovery

 

$

400

   

$

357

   

$

43

 

12.2

%

Implied Dollar Recovery

 

$

1.600

   

$

1.427

   

$

0.173

 

12.2

%

               

 

Sponsor Equity Contributed to Company

 

$

300

   

$

250

   

$

50

 

20.0

%

Total Cash Contributed to Company

 

$

550

   

$

500

   

$

50

 

10.0

%

 

 

About EIG Global Energy Partners and Harbour Energy Ltd.

EIG Global Energy Partners (“EIG”) specializes in private investments in energy and energy-related infrastructure on a global basis and had $13.8 billion under management as of March 31, 2016. During its 34-year history, EIG has invested $22.2 billion in the sector through 310 projects or companies in 36 countries on six continents. EIG is headquartered in Washington, D.C. with offices in Houston, London, Sydney, Rio de Janeiro, Hong Kong and Seoul. For more information, please visit www.eigpartners.com.

Harbour Energy Ltd. (“Harbour Energy”) is an energy investment vehicle formed by EIG and the Noble Group to pursue control and near control investments in high-quality upstream and midstream energy assets globally. Harbour Energy is externally managed by EIG and led by a management team that includes Linda Z. Cook, a 29-year veteran of Royal Dutch Shell, as CEO and Terence Jupp, former Vice President of International Operations for Anadarko Petroleum, as COO. For more information, please visit www.harbourenergy.com.

Forward-Looking Statements

This news release contains “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995 and forward looking information as defined in applicable Canadian securities laws (collectively “forward-looking statements”). These statements, which express EIG’s current views concerning future events, contingencies or results, and use words like “anticipate,” “assume,” “believe,” “continue,”, “intend,” “plan,” “potential,” “predict,” “project,” “strategy,” “target” and similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will” and “would.” Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things: the ongoing restructuring proceedings of Pacific E&P, events in Colombia related to the restructuring of Pacific E&P, the response by Pacific E&P’s board of directors to EIG’s proposal and other similar factors.

 

Contacts

Media:
Sard Verbinnen & Co.
Robert Rendine
Brandon Messina
212-687-8080