Petrobas, Brazil’s state-run oil giant, announced Monday, its readiness for a planned share sale to raise a capital of $25 billion to be used in the funding of development of Brazil’s numerous subsalt oil reserves. However, the details of the rights issue are yet to be disclosed but a share placing is expected early and would allow the company to raise the targeted capital minus harming its investment grade credit rating.
The discoveries of mega offshore oil prospects in Brazil have enhanced its repute as a major energy frontier given its deep water fields. Petrobas’ planned investment in the pre-salt region refers to a vast geological formation of around 200km wide and more than 800 km long off the country’s southern coast. This area is thought to have reservoirs deep below a salt layer on the ocean floor that is thought to hold immense amounts of light oil, projected at approximately 50 to 100 billion barrels of recoverable crude.
The Brazilian government had earlier said that it would buy as many shares as possible in the company’s planned sale, according to the Oil, Gas and Renewable Fuels Secretary, Marco Antonio Martins Almeida. However, if the shares are bought by minority shareholders, the government’s stake in Petrobas will still remain intact; if there is a stock left over, the government will come in and increase its share, added the Minister.
Last week, the country’s lawmakers voted to allow the company issue new shares in exchange for the rights to tap government reserves off the country’s coast. In Petrobas’ plans, much of its earlier planned $220 billion investment through 2014, the world’s biggest oil-industry investment program, as it seeks to develop fields such as the offshore Tupi block, the largest crude discovery in the Americas since 1976; will be raised from the share sell and other sources.
The government, according to the Minister, can transfer over 5 billion barrels of government owned oil to the company, in return, Petrobas would forfeit exploration rights to the government after extracting the agreed 5 billion barrels its entitled to. Banco Bradesco SA, Citigroup Inc., Itau Unibanco Holding SA, Bank of America Corp.’s Merrill Lynch unit, Morgan Stanley and Banco Santander SA were selected by Petrobas on June 2 as global coordinators of the share sale.
The Brazilian government owns a 32% stake in the company and controls it through a majority of voting shares. Petrobas is the biggest oil company in the Latin Americas with various exploration rights both in Brazil and overseas.
June 15, 2010.