Saturday, September 25, 2010
Petroleo Brasileiro SA,
Brazil’s state-controlled oil producer, raised as much as $70 billion in the world’s largest share sale as investors bet on its plans to double output within a decade by tapping 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. The company sold 115 billion reais ($67 billion) of shares and banks have an option to buy another 5 billion reais, according to a statement sent late yesterday.
Petrobras is spending about $224 billion over the next five years to boost production to 5.38 million barrels a day by tapping deposits trapped under a layer of salt beneath the ocean floor. The share sale was priced at a 2 percent discount to yesterday’s close, suggesting investors are backing Petrobras’s plans to overtake industry rivals such as Chevron Corp.
“Many of the other global majors are being challenged because their reserves are being depleted,” said Ron Holt, chief executive officer of Hansberger Global Investors Inc. in Fort Lauderdale, Florida, which manages $8 billion. “If you look at the potential capital expenditures that the company has planned for the next several years, that is a very significant potential exploration project for them.”
The company is tapping demand for emerging-market assets to develop deposits including Tupi, the largest discovery in the Americas in three decades. The field, and the nearby Libra deposit in the so-called presalt region off the Brazilian coast, may each contain as many as 8 billion barrels of oil.
Exxon, Apple, PetroChina
After the sale Petrobras jumped to the fourth-biggest company in the world, behind Exxon Mobil Corp., Apple Inc. and PetroChina Co., data compiled by Bloomberg shows. Petrobras has a market value of $214 billion, more than companies including Microsoft Corp. and Wal-Mart Stores Inc.
“Given Petrobras’s superior asset base and growth profile versus global oils, we believe the stock should trade at a premium relative to peers,” Bank of America analyst Frank McGann said in a note to clients.
Petrobras has slumped 28 percent this year on concern the sale will cut earnings and boost state interference. After the share sale, investors will focus on Petrobras’s exploration program to exploit the discoveries, said Mirela Rappaport, who helps manage about $100 million at Investport in Sao Paulo.
Brazil will add the most oil production of any country outside of the Organization of Petroleum Exporting Countries, or OPEC, over the next 25 years and surpass Venezuela and Mexico to become the second-largest producer in the Americas, behind the United States, the EIA said in its International Energy Outlook.
Petrobras has doubled output in the past 10 years and will surpass Exxon’s current production by 2015 if it meets targets set in its current business plan.
Petrobras plans to boost production 7.8 percent this year, while Exxon is targeting an increase of 3 percent to 4 percent this year. Chevron plans to increase 1 percent a year for the next five years.
Still, Petrobras has missed production targets in the past and extracting oil from deep waters “could be slower and more expensive than anticipated,” McGann said. “Risks are oil prices, project execution, and politics.”
The company’s preferred shares fell 50 centavos, or 1.9 percent, to 26.30 reais at 5:07 p.m. in Sao Paulo trading, while the common stock dropped 2 percent to 29.65 reais.
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 5 billion barrels of oil reserves. The sale includes an over-allotment option by underwriters to sell 188 million shares, or about $3 billion, over the next 30 days.
The sale may signal President Luiz Inacio Lula da Silva is paving the way for greater control over the Brazilian economy before the likely election of his chosen successor Dilma Rousseff next month.
“It wasn’t in Frankfurt, it wasn’t in New York, it was in our Sao Paulo exchange that we carried out the biggest capitalization in the history of capitalism,” Lula said at an event in Sao Paulo today.
Production at Shell, based in The Hague, was about 3.15 million barrels a day in 2009, down from 3.25 million a year earlier, according to its annual report. Exxon’s output was about 3.93 million barrels in 2009, up from 3.92 million a year earlier.
Prior to the sale, Petrobras was valued at 8.03 times its estimated earnings for this year, according to data compiled by Bloomberg. That compares with 10.6 times for Beijing-based PetroChina Co., Asia’s biggest company by market value, and 10.8 times Irving, Texas-based Exxon, the world’s largest company by market capitalization, the data showed.
A total of 18 equity offerings were completed this year by Brazilian companies before Petrobras’ sale, raising $12.4 billion, data compiled by Bloomberg show. The shares have gained 20 percent, on average.
The government increased its stake in the company to 48 percent from 40 percent after the share sale, Finance Minister Guido Mantega said at an event in Sao Paulo today. That includes minority stakes held by state-owned banks.
Before the sale, the government controlled the company through 55.6 percent of voting shares. Petrobras didn’t disclose the government’s voting stake after the offering.
Lula is tightening the state’s grip on the domestic oil industry after Tupi was discovered 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 residents out of poverty.
Brazilian companies have struggled to raise as much as they sought in initial public offerings this year amid speculation higher interest rates and swelling budget deficits in Europe would slow the global economic recovery. Renova Energia SA, a Brazilian developer of wind and hydroelectric power, raised 150 million reais, a fifth of what it had initially planned.
OSX Brasil SA, billionaire Eike Batista’s shipbuilding company, raised 2.45 billion reais in March in Brazil’s biggest IPO this year. That was about 7.5 billion reais less than the company originally sought.
Investors may be more interested in other Brazilian companies after the Petrobras share sale, Will Landers, who oversees about $8 billion in Latin American stocks at BlackRock Inc., said in an e-mailed response to questions.
“The fact that Petrobras was able to raise the largest equity offering ever done in the world, 10 days before a presidential election shows how far this market has come,” Landers wrote. “Removing this huge overhang from the market has to be seen as positive.”
A related video from this article you may find at: http://www.bloomberg.com/video/63211690/