Petrobras Strikes $42.5 Billion Deal for Brazil Fields
In a step toward one of the largest share offerings this year, Petroleo Brasileiro, the Brazilian national oil company, said Wednesday that it had agreed to issue $42.5 billion in new stock to the Brazilian government to win the right to 5 billion barrels of oil in offshore fields.
The company, which goes by Petrobras, needs to invest $224 billion by 2014 under its business plan, and its upcoming global share issue will be a crucial step to meeting that goal. Details of the $25 billion global issue are due to be released Friday, Petrobras said in its statement. The transaction with the government is set to take place on September 30.
The linchpin of the deal was the estimated average price of a barrel of oil — the parties agreed to $8.51 — which determined the size of the rights issue Petrobras would make to the government, and will influence the amount of funds the company will attempt to raise on public markets.
Price negotiations between Petrobras and the government, which owns a controlling stake in the company, have held up the share issue, which was initially set for the end of June.
Lilyanna Yang, an analyst at UBS, estimated the price at $7.50, but she wrote in a research note last week that $8.50 per barrel “could still prove to be accretive.”
President Luiz Inácio Lula da Silva of Brazil said that while shareholders wanted “cheapest price possible,” it was the government’s job to negotiate for the “fairest,” according to the Folha de São Paulo.
With the offering, minority shareholders will have a chance to maintain their stakes, but those that don’t buy in will see their interest diluted and the remaining shares will be sold on the market.
Petrobras shares rose 1,59 reais, or 4.93 percent, to 31.50 reais at the close in São Paulo on Wednesday, a turnaround in a long slide. The company’s American Depository Receipts are down 26.45 percent for the year.
Investors like George Soros, BlackRock and Banco BTG Pactual have been part of a recent sell off in Petrobras shares, according to Bloomberg News.
–Chris V. Nicholson |
