Shares of oil company Pacific Rubiales were trading lower Thursday, one day after Colombian regulators said they’re investigating whether the Toronto-based company should be labeled a “business group” rather than a “company” due to its apparent links to more than a dozen subsidiaries and other companies.
Rubiales, which also trades in Toronto, was 1.56% lower at 45,260 pesos (US$25.42) in early trading Thursday on the Colombian Stock Exchange. The market as a whole was down 0.73%.
Though based in Canada, most of Rubiales’ assets are in Colombia where it is the country’s largest and most productive private oil company. Local newspaper La Republica has run a series of articles in recent days questioning Rubiales’ legal structure and quoting analysts and scholars who say the company’s organization may be aimed at evading taxes.
The newspaper says Rubiales controls several branch companies that manage oil fields and pipelines within Colombia but that were created as Panamanian or Canadian companies rather than Colombian.
The Colombian government’s regulator of companies, known as Supersociedades, said in a statement late Wednesday that in response to the recent articles it was “opening an administrative investigation to establish if it’s verified that the following companies constitute a … business group.” It then named 15 companies, including Pacific Resources Ltd. Carbon, Pacific Stratus Energy and Quifa Petroleum. The regulator said the list was only partial.
A Pacific Rubiales official in Bogota said the company had no immediate comment on the government’s announcement or the allegations in the local press, but it might issue a statement later.
Juan David Pineros, an oil analyst at Colombia’s biggest brokerage InterBolsa, questions whether Rubiales may have done anything improper, noting that many other firms in Colombia, especially oil companies, also have complex structures in which they manage various subsidiaries.
Still, Pineros said the question of whether Pacific Rubiales should be classified a business group as opposed to a company is a legitimate one that merits examination. “It’s a matter for the regulator to determine,” he said.
Other analysts suggested the allegations made in La Republica and the ensuing government investigation were off-base.
“It is frankly borderline libel what is occurring considering that it makes no difference to the company and that there all manner of other companies here who have multiple subsidiaries,” analysts at Celfin said in a report. “What is the motivation of these attacks is hard to fathom.”