Vetra: A Colombian story

Vetra Energia is a private Colombian based E&P with a sole focus on Colombia.

Its main asset is a 69.5% operated interest in the Sur Oriente block; Petroamerica is the partner on the block with 30.5% WI which it acquired through the merger with Suroco in 2014. Vetra Energia also has a 100% WI in the La Punta block and a 60% operated interest in VMM2 (40% Canacol) which contains the Mono Araña field.

In July 2013, Vetra Energia was acquired by a consortium led by ACON Investments and Capital International. The Vetra management team, along with private investors including oil & gas veteran Atul Gupta also participated in the acquisition. The Vetra management team and private investors participated through a vehicle called New VEG.

Vetra Holdings SARL was incorporated for the acquisition of Vetra Energia and is owned by the consortium members. Based on the company’s filings, the acquisition consideration is estimated to be c.USD440mm. This has largely been funded through pseudo-debt with USD265mm of Preferred Equity Certificates (“PECs”) issued to the consortium members and USD187mm of promissory notes issued to Vetra’s selling shareholders. The PECs carry no interest whereas the promissory notes carry a rate of 10% per annum.

In 2013, Vetra produced 5.6mmbbl or 15.4mbbl/d. However, latest filings with the ANH show that production had plummeted to 6mbbl/d in2014 suggesting that the consortium may have significantly overpaid for the acquisition. This view is supported by the valuation of the assets from public sources:

• Broker consensus read-through valuations of $92mm for Sur Oriente and <$1mm for the other assets
• Wood Mackenzie valuation of $63mm for Sur Oriente and <$1mm for the other assets
• Furthermore, Petroamerica recorded a write-down of $30.4mm on Sur Oriente in 2014

Sur Oriente is Vetra’s main asset and is located in the Putumayo Basin. It is owned through Consorcio Colombia Energy (“CCE”) in which Vetra holds a 69.5% interest and Petroamerica 30.5% interest. CCE holds a Crude Incremental Production Contract with Ecopetrol on Sur Oriente which entitles Ecopetrol a share of the block’s production which is determined by an R-factor. Petroamerica’s disclosure notes that Ecopetrol is entitled to 52% of production; the remaining 48% of production is shared between Vetra and Petroamerica per their interests in CCE. The block produces from three fields (Pinuna-Quillacinga, Cohembi and Quinde) and in 2014, gross production was c.14.3mbbl/d from six wells.

Production from Sur Oriente was historically trucked to the nearby Orito facilities and then exported via the Trans-Andean Pipeline (“OTA”) to the port of Tumaco on the Pacific coast where it is sold as the Colombian South Blend. In November 2014, a new export route was established for the Cohembi and Quinde fields with crude trucked to the Amazonas Station in Ecuador and transported through the Oleoducto de Crudos Pesados (“OCP”) pipeline which is expected to result in $8-10/bbl improvement in netbacks over time.

Pipeline export routes from Putumayo
Source: Petroamerica January 2015 corporate presentation