Petrobras sells 64 bln dlrs of stock to fund oil exploration
admin RIO DE JANEIRO (AFP) – Brazil’s Petrobras unveiled one of the world’s biggest share offerings Friday, a sale of up to 64 billion dollars in new stock to finance oil exploration aimed at turning Brazil into a leading oil exporter of the 21st century.
The transaction could be expanded to 74 billion dollars if there was heavy demand, the state-run company said.
The cash serves as the core of an ambitious plan Petrobras has already outlined to boost capital expenditure over the next five years to 224 billion dollars as it seeks to tap potentially vast oil reserves discovered recently off the coast of Rio de Janeiro.
The 64-billion-dollar target for the new share offer represents a more than 40 percent increase in the company’s capital, which on Thursday was estimated at 150 billion dollars.
Petrobras’s share prices rose nearly five percent during trading in Sao Paulo after the announcement, confirming investor confidence in the issuance and Brazil’s outlook generally.
Analysts’ predictions that the market could balk at the high price Petrobras has agreed to pay the government for new reserves in an oil-for-shares transaction seemed confounded, at least initially.
The offer would see 2.1 million common shares and 1.5 million preferred shares issued, the company said in a statement. The price of the new shares would be given September 23.
Existing shareholders — including the government — will have first access to the bulk of the shares.
Petrobras estimates so-called subsalt fields offshore could more than triple its existing proven oil reserves of 14 billion barrels, catapulting Brazil into the top league of OPEC nations. Brazil is not a member of the Organization of the Petroleum Exporting Countries.
But to get at the black stuff, Petrobras will have to overcome a series of costly technological challenges unprecedented in the oil industry. The company, a world leader in deepwater oil exploration, is confident it will be able to do so.
Petrobras in June said its daily production stood at 2.5 million barrels a day. It also announced it had discovered yet another reserve of light crude in deep offshore waters, estimated to contain 380 million barrels.
President Luiz Inacio Lula da Silva’s government has modified laws governing Brazil’s oil sector and promoted greater state participation in Petrobras to ensure more sovereign rights over what appears to be an oil bonanza.
The government Wednesday agreed to exchange five billion barrels of oil in the newly discovered subsalt fields for 42 billion dollars’ worth of more shares in Petrobras.
It already has 39-percent stake in the group: 32 percent directly and another seven percent indirectly, through its BNDES state investment bank.
Analysts said the money raised for the share offer would have to be carefully managed to avoid Petrobras having to return to the markets in the short term to raise more. The company is already as extended as it can be in terms of credit without risking its blue-chip rating.
Adriano Pires, a petroleum sector specialist at the Brazilian Infrastructure Center, told AFP the stock issue was only going to cover investment in fields already earmarked for exploitation.
More funds will be needed for more recently discovered reserves — or if the billions raised is spent unwisely, he said.
«As its (Petrobras’s) management is very politicized, I’m afraid that this money raised from the market could be burnt through quickly. Because politicized management creates huge economic inefficiencies,» he said.
Another analyst, Tereza Fernandes of the consulting firm MB Asociados, predicted the share offer would be a success, but that doubts could then occur over rates of return for investors and the value of Petrobras shares.
«Obviously a lot depends on the price per barrel of oil on the international market,» she said.
