Petroleo Brasileiro SA, the state-controlled oil company, raised 120.4 billion reais ($70 billion) from the Brazilian government and other investors in the world’s largest share sale as it seeks cash to develop offshore fields.
Petrobras, based in Rio de Janeiro, sold 2.4 billion common shares for 29.65 reais each and priced 1.87 billion preferred stock at 26.30 reais apiece, according to a regulatory filing from the company today. That represents a discount of about two per cent below today’s closing price.
The company is selling stock to fund development of offshore oil fields such as Tupi, the largest discovery in the Americas in three decades, and to preserve its investment grade credit rating. As part of the share sale, Petrobras issued about $42.5 billion of stock to Brazil’s government in exchange for the rights to develop five billion barrels of oil reserves.
| FACTSHEET | |
| Headquarters | Rio de Janeiro |
| Employees | 76,919 |
| Global presence | 28 countries |
| Production | 2 mbpd of oil & LNG |
| Reserves | 11.19 bn barrels |
| Pipelines | 25,197 km |
| Refineries | 16 |
| Earnings | $8.6 bn |
| Capex | $19.4 bn |
| Financials: H1 2010 US GAAP; Other data: 2009 Source: Petrobras | |
“It’s positive that they managed to get such strong demand and the price was above market expectations,” said Mirela Rappaport, who helps manage about $100 million at Investport in Sao Paulo, including Petrobras shares. “In the long run, what will be important for Petrobras is if oil prices go up and for how long and at what cost it will take to develop oil reserves.”
Petrobras’s preferred shares rose 82 centavos, or 3.2 per cent, to 26.80 reais in Sao Paulo trading today, while the common stock climbed 1.9 per cent to close at 30.25 reais.
Before the offering, Brazil’s government owned a 32 per cent stake in Petrobras and controlled the company through 55.6 per cent of voting shares. The sale will probably lead to an increase in the government’s stake, the company said in a September 3 prospectus.
Petrobras slumped 27 per cent this year, the second-worst performing major oil stock after BP Plc, on concern the sale would cut earnings and boost state interference.
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The sale may signal President Luiz Inacio Lula de Silva is paving the way for greater control over the Brazilian economy before the likely election of his chosen successor Dilma Rousseff next month.
Lula is tightening the state’s grip on the domestic oil industry after the Tupi discovery in 2007, the largest find in the western hemisphere since Mexico’s Cantarell in 1976. He says Brazil is relying on the country’s oil wealth to help raise the nation’s 192 million people out of poverty.
“I’d be in the camp that is less comfortable with having the government more involved,” Madelynn Matlock, who helps oversee about $13 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview before the offering price was announced. “Not that I think they’d do anything wrong, but it becomes more of a public-utility structure than an entrepreneurial company situation.”
The public share offering will help raise funds for a $224 billion investment plan that includes projects to develop offshore fields including Tupi, which may hold 8 billion barrels of oil. Chief Executive Officer Jose Sergio Gabrielli plans to double output to 5.38 million barrels a day by 2020, from 2.7 million barrels in 2010.
The Petrobras sale amounted to about 18 per cent of the value of all equity offerings completed in 2010 and is more than three times the record $22.1 billion raised by Agricultural Bank of China in July, according to Bloomberg data.
About $379 billion has been raised by companies selling shares this year, the same pace as a year ago, data compiled by Bloomberg show. A total of 167 equity offerings valued at $29.5 billion have been postponed or withdrawn around the world this year, the most since at least 1998, the data show.