Pacific Rubiales, following in the footsteps of its predecessors, Pacific Stratus and Petro Rubiales, is focused on creating the maximum possible value for shareholders by following a "combined strategy". This means, on the one hand, using its technical and managerial strength to select exploration and production projects with significant upside and, on the other hand, planning for the highest possible growth by, for the next few years at least, reinvesting most of the company’s cash flow.
The right combination of production assets and exploration areas provides Pacific Rubiales with an enviable strategic position. Production with significant upside potential is the cornerstone of the strategy, as we expect the cash flow from operations to not only be sufficient to support the company’s exploration and production (E&P) activities, but also provide a significant profit. Furthermore, we also intend to focus our efforts on increasing recovery, more precisely delineating our reservoirs, and improving technology, all with a goal of increasing reserves, which of course will also create value for our shareholders.
On the other hand, to us, exploration means calculated risk-taking in areas where Pacific Rubiales’ knowledge can provide a significant edge and improves the chances of a discovery, which in turn adds value to our shareholders and assures continuous growth.
Oil E&P is a segmented market, where large companies – usually referred to as majors and super-majors – are generally in the quest for giant fields. Finding and developing such fields requires significant amounts of risk capital for exploration and even larger quantities for developing adiscovery. As a result, the high cost of capital serves as an important barrier to entry in this niche market. At the other end of the spectrum are the small to mediumsized fields that are most economically exploited by non-major companies that can leverage their typically low operational expenses and overhead, as well as their technical know-how, into relatively low cost discoveries.
We have seen, and indeed are part of, the trend towards consolidation at the small to medium-sized end of the spectrum. We believe that the trend where small companies are acquired by mid-sized actors, in particular in the Sub Andean region, will create significant opportunities on which we can capitalize.
To implement this strategy, Pacific Rubiales has acquired rights to a substantial exploration portfolio in Colombia and Peru – the largest among its immediate peers in terms of net acreage – providing significant potential for long-term growth beyond that of its core assets. Additionally, the company is always on the lookout for other assets that can add to or complement our portfolio. Management’s skill and experience in oil and gas exploration and field development in Latin American Basins provides a breadth of knowledge that is well suited to take full advantage of present and future opportunities in exploration and production.