Ron, Watch what they DO not what they SAY. <g> Or to paraphrase a famous senator "A few hundred million here, a few hundred million there, it starts adding up to real money!" <G>
Coastal adds close to $300 mill. Texaco adds $1.5 billion in Brazil. Exxon, Mobil, and RD/Shell add another $345 mill. in Brazil. I know, I know, they don't WANNA but they GOTTA. It is still real money, being spent on real projects by REAL big oil companies.
BTW TDW upgraded by PRU today.
biz.yahoo.com
quote.bloomberg.com
Bloomberg Energy
Fri, 23 Jul 1999, 9:44am EDT
7/23 6:37 Brazil's Petrobras Looks to Joint Ventures to Offset Credit Crunch
By Jeb Blount
Petrobras Looks to Joint Ventures to Offset Credit Crunch
Rio de Janeiro, July 23 (Bloomberg) -- Petroleo Brasileiro
SA, Brazil's state-run oil company, signed contracts worth $345
million this week turning to new financing plans to offset
limited access to international capital markets.
The agreements could lead to investments of at least $2
billion from partners including Royal Dutch/Shell Group, Exxon
Corp. and Mobil Corp. if they strike oil. The three agreed to
spend $140 million to help Petrobras drill off the coast of Rio
de Janeiro.
In another new venture, Mobil and Unocal Corp. agreed to
spend another $55 million on exploration off the coast of
Espirito Santo state. And Petrobras sold an offshore oil rig to a
group led by GE Capital for $150 million and will lease it back.
''These are signs that the company and the government are
getting smarter and savvier about markets and raising capital,''
said Mary Quinn, an analyst at Warburg Dillon Read. ''Everyone
knows they have oil and the technology, what they don't have is
enough money to invest.'' She raised her recommendation to
''buy'' from ''hold'' earlier this month.
The signings come at a critical time for Petrobras. Oil and
technology rich, Petrobras is cash-poor. The company needs an
estimated $11 billion to develop the oil leases it received last
year from the government in exchange for giving up its monopoly.
Reserves
Petrobras has 17 billion barrels of proven, possible and
probable reserves according to Quinn. It produces about 1.2
million barrels a day, or about 60 percent of Brazil's needs.
''Brazil's offshore is one of the most promising offshore
areas in the world,'' said Heinz Rothermund, managing director of
Shell International.
Before Brazil's January devaluation, the company had planned
to raise about $1.3 billion in international capital markets this
year with $650 million for the development of the Marlim offshore
field by September.
Petrobras hasn't even raised 10 percent of that total amount
and has few places, besides joint ventures, to find it. In the
interim it has raised short-term capital in Brazil at rates above
20 percent a year.
The stakes are rising because state aid is dwindling and
foreign companies have just won the rights to explore on
Petrobras' home turf.
Selling stock is complicated by the fact that Brazil's
constitution still requires the government to maintain voting
control of Petrobras.
Joint ventures, like those with Shell, Exxon and Unocal, are
about all that's left. Petrobras provides the drilling properties
and technology, its partners provide the capital. If oil is
found, the expenses get divvied up.
They also show an increased willingness on the part of the
government to fulfill industry demands for lower taxes and better
contract terms. Shell, Exxon, Mobil and Unocal have been
negotiating with Petrobras for nearly two years but only signed
on after the government made key concessions.
Import taxes on oil rigs have been eased and local equipment
suppliers and ship-yards have had some taxes reduced. What's
more, the government has eased the time limits for finding oil on
Petrobras leases.
Until recently Petrobras and its partners had to find oil by
August 2000 or risk losing the exploration rights. They now have
until 2002 or 2007, depending on the exploration block.
Few foreign partners would risk money on such short terms.
''The government finally realized that they had to do
something if they wanted to get this industry moving,'' said
Quinn.
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