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Energy Summary for July 9, 2015

2015-07-09 20:36 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for August delivery added $1.13 to $52.78 on the New York Merc, while Brent for August added $1.56 to $58.61 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.65 to WTI ($40.13), down from a discount of $11.85. Natural gas for August added 4.1 cents to $2.726. The TSX energy index lost 2.53 points to close at 196.00.

Pacific Rubiales Energy Corp. (PRE) plummeted $2.40 to $2.85 on 27.9 million shares. Yesterday after the close, Mexican conglomerate Alfa SAB and private-equity-backed Harbour Energy dropped their proposed $6.50-a-share takeover offer for the company, citing early proxy results that suggested strong shareholder opposition to the offer. The opposition was led by 19.8-per-cent shareholder O'Hara Administration. It put out statement after statement urging shareholders to reject the offer, but even it may be surprised at Alfa and Harbour's decision to just walk away. Its prediction earlier this week was that the suitors "will probably raise their offer to $7.50 [a share]," as a spokesman told Bloomberg on Monday. He added that O'Hara would still oppose such an offer and would need to see over $9 a share before it would even consider acceptance. According to its own disclosure in its June 17 proxy circular, O'Hara paid an average of $4.40 for each of its 62.6 million shares, meaning that a takeover at $6.50 would have represented a nearly 50-per-cent return and a takeover at $9 would have represented more than a 100-per-cent return -- not bad for an investor that filed its first early warning report two and a half months ago. Instead, with the offer dropped, O'Hara's investment of $275-million is today worth $178-million. O'Hara hid any dismay it might have felt in a statement released this morning. It said it was "pleased" with the termination and "look[ed] forward to engaging with various stakeholders and playing a constructive role in the company's future." If it is serious, it should approach Alfa, the scorned suitor. Alfa is the second-largest shareholder of Pacific Rubiales and holds 58.9 million shares or 18.9 per cent. What it paid for its first 31.4 million shares is not clear, but the rest were acquired at a painful average of about $20.25. Alfa previously said that if the takeover did not go through, it would explore all options for these shares, including dumping them. It also said it "will be forced" to drop Pacific Rubiales as a potential joint venturer in Mexico.

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