Petrobras: Is ‘A Compensation of Billions’ Ahead For Oil Giant?
By Johanna Bennett
Is it possible that the rout in global oil prices may finally profit Petrobras (PBR)?
Getty Images
Brazil’s state-run oil giant and the government are negotiating mandatory changes to a 2010 contract to exploit up to 5 billion barrels of offshore oil and gas in the in the so-called Transfer of Rights Areas in the nation’s Santos Basin south of Rio de Janeiro. The deal calls for the value of those 5 billion barrels to be revised in five years, and talks have been ongoing since 2015.
Why do we care? A lot has happened in the oil industry in the past six years. When Petrobras bought those rights for more than $50 billion back in 2010, oil was close to $100 a barrel vs $50 a barrel today.
Petrobras was expected to have to pay billions of dollars more for rights to the initial 5 billion barrels and much more for the right to exploit the additional discoveries. Yet in recent months, both Petrobras and the government have said the company may be entitled to a rebate fon the initial 5 billion barrels. The government has also said it may sell the additional rights to other companies as Petrobras is having trouble generating enough cash to develop its huge undeveloped resources.
As J.P. Morgan’s Rodolfo Angele writes:
…news flow on the subject is coming in with a positive tone. Today O Globo newspaper is reporting that: (a) the ToR adjustment would be in favor of Petrobras, and (b) the adjustment could potentially be paid in cash (instead of in more barrels of oil, which was the market’s expectations). The final assessment of the revised valuation for the ToR barrels is not yet known but could be material for Petrobras.
Rodolfo goes into a bit more detail:
…Originally, payment would be made with barrels rather than with cash. But Mr. Márcio Felix, secretary at the Ministry of Mines and Energy, is mentioning that the government may actually find an alternative to pay Petrobras in cash. The funding would be the sale of the barrels that exceed the 5bn barrels that belong to Petrobras to private players.
Value to be paid is unknown. This is the one piece of information that investors will want to hear about, but unfortunately it was not disclosed. In fact, a final value may not yet have been agreed upon, but we believe it can potentially be a large number, especially considering the volumes of oil involved in the renegotiation. The newspaper article mentions a compensation of “billions.”
[
pero pueden estar 6 o 7 para el 15/12 fecha en la cual vencen....