Petroleo Brasileiro SA (PETR4)’s worst debt position in a decade is boosting chances the Brazilian oil company will step aside and let Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA) buy offshore exploration licenses in Latin America’s biggest auction this year.
Exxon has been the most active in requesting data about the acreage Brazil is offering next month to take advantage of government-run Petrobras holding back its full participation, a state official with knowledge of the sale said.
As Petrobras boosted investment in deepwater finds in past years, it became the world’s most indebted publicly-traded oil company, with $96 billion borrowed, or quadruple the level of 2008 compared with earnings before interest, tax, depreciation and amortization.
Brazil is about to open its doors wider to international oil companies from Britain’s BP (BP/) Plc to China Petroleum & Chemical Corp. (386) to accelerate development in a country already home to the most oil finds this century.
The government has estimated the nation’s first offshore auction in six years will generate as much as $5 billion for public spending.
“The foreign companies have an opportunity here,” Bernardo Wjuniski, an analyst at Medley Global Advisers, said by telephone from Sao Paulo.
“They have more space to gain.” The business plan of Rio de Janeiro-based Petrobras says it will be “selective” placing bids in the so-called Round 11 auction in May as it focuses on developing existing fields.
Other Brazilian contenders also face tighter finances as they invest in infrastructure to move from exploration to production for recently discovered fields, Medley Global Advisers said.
Selling Below Cost
The Brazilian producer declined to comment this week on Round 11 bidding strategy in an e-mailed response to questions, saying instead that “Petrobras has interest in exploring and producing oil commercially in every basin in Brazil, and will evaluate the best form of participation in the auctions.”
Exxon doesn’t comment on license rounds until after the results, spokesman Patrick McGinn said in an e-mailed reply to questions. Shell is “actively assessing” all blocks on offer, the company’s Latin American press department wrote in an e- mailed response, declining to comment further.
Brazilian oil and gas regulator ANP declined to comment on companies’ bidding strategies in an e-mailed response. The Energy Ministry declined to comment, according to a ministerial press department official who isn’t an authorized spokesman.
Picking Over Parcels
Petrobras produces more than 90 percent of Brazil’s oil and sells imported fuel below cost because of government price caps.
The company posted its first quarterly loss in 13 years in the second quarter of 2012. The shares have declined 9.9 percent in 2013 in Brazil, compared with a 7.2 percent drop for the Dow Jones Emerging Markets Titans Oil & Gas 30 Index. (DJEEO)
The extra yield, or spread, investors demand to buy Petrobras’s dollar-denominated bonds due 2021 instead of U.S. Treasuries widened to 251 basis points today from 222 basis points at the end of last year.
Petrobras probably will limit its focus to the most attractive areas up for auction and leave more uncharted geology for other companies, said Marcelo Muller, a partner at AEM Capital, a Rio de Janeiro-based private equity firm focused on the oil industry.
Petrobras has made discoveries and studied natural seeps on the ocean floor in the region to gain knowledge of the geology, he said. Brazil is offering 289 blocks that hold an estimated 36.7 billion barrels of oil equivalent. That’s about 14 years of domestic consumption, based on a 35 percent industry average recovery rate.
71 Contenders
The government also expects major offers from companies including Irving, Texas-based Exxon, Shell, BP and BG Group Plc (BG/), said the official, adding Repsol (REP) and China Petroleum & Chemical will participate as partners. The official asked not to be named because talks with bidders aren’t public.
BP spokesman Robert Wine declined to comment on the licensing round, as did BG Group spokesman Neil Burrows. Four out of the five largest oil producers by market value -- Exxon, Chevron Corp. (CVX), Shell and BP -- are among the 71 companies that submitted paperwork to compete in the round.
Kurt Glaubitz, a spokesman for Chevron, confirmed in an e- mail that the San Ramon, California-based producer had applied for qualification, declining to comment on opportunities that may arise from Petrobras’s bidding approach. Repsol spokesman Kristian Rix in Madrid declined to comment on strategies for Round 11.
“It’s definitely the most eagerly awaited bidding round,” Ruaraidh Montgomery, a senior analyst at oil and gas researcher Wood Mackenzie, said by phone from Houston.
“The equatorial margin is a global exploration hot spot, interest that has only been heightened by the discovery of Zaedyus in offshore French Guiana in 2011.”
French Guiana Find
London-based Tullow Oil Plc (TLW) found the 840 million-barrel Zaedyus field in 2011. Repsol and CGX Energy Inc. (OYL) are testing the boundaries of the discovery further west in Guyana. Oil companies are eager to explore for similar fields across French Guiana’s border in Brazil, Montgomery said.
Petrobras already needs to borrow at least $60 billion more in the five years through 2017 to develop offshore properties and build new refineries.
Chief Executive Officer Maria das Gracas Foster has started a program to find 32 billion reais ($16.2 billion) in cost savings and the company is selling and restructuring assets to raise $9.9 billion.
Petrobras is the biggest producer in waters deeper than 300 meters (984 feet).
Project Funds
“Our stance in the exploration area is selective investments, this also includes our vision relating to future opportunities,” Jose Formigli, Petrobras’ head of exploration and production, told industry executives at an April 9 event in Rio.
“Of course we will be active, but selective, and with partners. For us partnerships make a lot of sense, especially in exploration.” Petrobras’s $144 billion in sales last year was dwarfed by Exxon’s $421 billion, Chevron’s $223 billion and Shell’s $467 billion.
The producer’s long-term debt-to-capital ratio, a measure of funds available for projects, was 33.41 at the end of the fourth quarter, the highest since the first quarter of 2005, according to data compiled by Bloomberg.
By comparison, Exxon had a ratio of 4.33, Chevron had 8.04 and Shell had 13.14, the data show. Even so, Petrobras is expected to invest $45.7 billion over the next year, more than $34.7 billion at Exxon, $33.8 billion at Chevron and $34 billion at Shell, according to analyst forecasts compiled by Bloomberg.
Uruguay Vs. Brazil
BP and Total SA (FP) were two of the four companies that won acreage in neighboring Uruguay’s 2012 auction for offshore areas, underscoring the interest of the world’s biggest oil companies to expand in South America, T.J. Conway, a research and advisory manager at New York-based Energy Intelligence Group, said by telephone from Washington.
“The majors led the charge into Uruguay, and Brazil is sort of in that context,” Conway said. “Brazil is one of the preeminent offshore deepwater plays in the world.”
Brazil’s first sale of oil permits since 2008 will give Exxon a chance to resume exploration in the country after it drilled dry holes and returned a license last year in the so- called pre-salt region that holds the country’s largest discoveries.
Exxon also explored Brazil’s Foz de Amazonas basin in 2001 and 2002 and failed to find oil in one of the areas where the government will offer new licenses in May. Round 11’s 155,800 square kilometers is larger than oil auctions Trinidad, Mexico, Ecuador, Peru and Suriname have announced for this year.
Brazil hasn’t announced the acreage for a second offshore round and an onshore natural-gas round planned for later this year.
New Blocks
A total of about 230,000 square kilometers of exploration licenses were sold in Latin America in 2012, Wood Mackenzie said in a March report. Petrobras, the world’s No. 1 deep-water producer, has discovered high-quality oil in the Ceara and Sergipe basins, where new blocks will be available. The geology along Brazil’s equator also mirrors recent discoveries near the coast of Africa.
“People are waiting to see, as usual, what the 800-pound gorilla in the room does, and where Petrobras ends up with its budgeting and how much it is going to commit,” said Robert Gruendel, head of the energy practice at the DLA Piper law firm that has oil clients in Brazil.
“The reality of that is setting in.”
Local Content
While Brazil’s oil-rich geology has lured oil companies to Latin America’s largest economy, local content regulations and the lack of infrastructure in Brazil’s northeast may temper enthusiasm for new blocks, said Wagner Freire, a former exploration and production manager at Petrobras.
Companies often have to buy a majority of goods and services locally, depending on each project, as part of a government policy to spur economic growth and employment.
“No question there is good potential, but things are moving very slowly in the Brazilian oil business,” Freire said by phone from Rio de Janeiro.
“A lot of things have to be done with local content.” A combination of waning production at aging fields and losses from selling imported fuel below cost reduced Petrobras’s 2012 profits to the lowest since 2004.
The company plans to raise $9.9 billion selling assets in Brazil and abroad to help finance investments. Brazil’s four publicly-traded oil companies -- Petrobras, OGX Petroleo e Gas Participacoes SA, QGEP Participacoes SA (QGEP3) and HRT Participacoes em Petroleo SA -- were among the 71 companies that submitted paperwork to compete in the auction, the National Petroleum Agency said April 4.
“On balance I’d look at it as an opportunity if Petrobras is going to be a little bit more judicious in how it invests,” Gruendel said.
“There will be all sorts of opportunities, both to joint venture with existing partners in Brazil as well as to pursue greenfield operations.”
bloomberg.com
Exxon has been the most active in requesting data about the acreage Brazil is offering next month to take advantage of government-run Petrobras holding back its full participation, a state official with knowledge of the sale said.
As Petrobras boosted investment in deepwater finds in past years, it became the world’s most indebted publicly-traded oil company, with $96 billion borrowed, or quadruple the level of 2008 compared with earnings before interest, tax, depreciation and amortization.
Brazil is about to open its doors wider to international oil companies from Britain’s BP (BP/) Plc to China Petroleum & Chemical Corp. (386) to accelerate development in a country already home to the most oil finds this century.
The government has estimated the nation’s first offshore auction in six years will generate as much as $5 billion for public spending.
“The foreign companies have an opportunity here,” Bernardo Wjuniski, an analyst at Medley Global Advisers, said by telephone from Sao Paulo.
“They have more space to gain.” The business plan of Rio de Janeiro-based Petrobras says it will be “selective” placing bids in the so-called Round 11 auction in May as it focuses on developing existing fields.
Other Brazilian contenders also face tighter finances as they invest in infrastructure to move from exploration to production for recently discovered fields, Medley Global Advisers said.
Selling Below Cost
The Brazilian producer declined to comment this week on Round 11 bidding strategy in an e-mailed response to questions, saying instead that “Petrobras has interest in exploring and producing oil commercially in every basin in Brazil, and will evaluate the best form of participation in the auctions.”
Exxon doesn’t comment on license rounds until after the results, spokesman Patrick McGinn said in an e-mailed reply to questions. Shell is “actively assessing” all blocks on offer, the company’s Latin American press department wrote in an e- mailed response, declining to comment further.
Brazilian oil and gas regulator ANP declined to comment on companies’ bidding strategies in an e-mailed response. The Energy Ministry declined to comment, according to a ministerial press department official who isn’t an authorized spokesman.
Picking Over Parcels
Petrobras produces more than 90 percent of Brazil’s oil and sells imported fuel below cost because of government price caps.
The company posted its first quarterly loss in 13 years in the second quarter of 2012. The shares have declined 9.9 percent in 2013 in Brazil, compared with a 7.2 percent drop for the Dow Jones Emerging Markets Titans Oil & Gas 30 Index. (DJEEO)
The extra yield, or spread, investors demand to buy Petrobras’s dollar-denominated bonds due 2021 instead of U.S. Treasuries widened to 251 basis points today from 222 basis points at the end of last year.
Petrobras probably will limit its focus to the most attractive areas up for auction and leave more uncharted geology for other companies, said Marcelo Muller, a partner at AEM Capital, a Rio de Janeiro-based private equity firm focused on the oil industry.
Petrobras has made discoveries and studied natural seeps on the ocean floor in the region to gain knowledge of the geology, he said. Brazil is offering 289 blocks that hold an estimated 36.7 billion barrels of oil equivalent. That’s about 14 years of domestic consumption, based on a 35 percent industry average recovery rate.
71 Contenders
The government also expects major offers from companies including Irving, Texas-based Exxon, Shell, BP and BG Group Plc (BG/), said the official, adding Repsol (REP) and China Petroleum & Chemical will participate as partners. The official asked not to be named because talks with bidders aren’t public.
BP spokesman Robert Wine declined to comment on the licensing round, as did BG Group spokesman Neil Burrows. Four out of the five largest oil producers by market value -- Exxon, Chevron Corp. (CVX), Shell and BP -- are among the 71 companies that submitted paperwork to compete in the round.
Kurt Glaubitz, a spokesman for Chevron, confirmed in an e- mail that the San Ramon, California-based producer had applied for qualification, declining to comment on opportunities that may arise from Petrobras’s bidding approach. Repsol spokesman Kristian Rix in Madrid declined to comment on strategies for Round 11.
“It’s definitely the most eagerly awaited bidding round,” Ruaraidh Montgomery, a senior analyst at oil and gas researcher Wood Mackenzie, said by phone from Houston.
“The equatorial margin is a global exploration hot spot, interest that has only been heightened by the discovery of Zaedyus in offshore French Guiana in 2011.”
French Guiana Find
London-based Tullow Oil Plc (TLW) found the 840 million-barrel Zaedyus field in 2011. Repsol and CGX Energy Inc. (OYL) are testing the boundaries of the discovery further west in Guyana. Oil companies are eager to explore for similar fields across French Guiana’s border in Brazil, Montgomery said.
Petrobras already needs to borrow at least $60 billion more in the five years through 2017 to develop offshore properties and build new refineries.
Chief Executive Officer Maria das Gracas Foster has started a program to find 32 billion reais ($16.2 billion) in cost savings and the company is selling and restructuring assets to raise $9.9 billion.
Petrobras is the biggest producer in waters deeper than 300 meters (984 feet).
Project Funds
“Our stance in the exploration area is selective investments, this also includes our vision relating to future opportunities,” Jose Formigli, Petrobras’ head of exploration and production, told industry executives at an April 9 event in Rio.
“Of course we will be active, but selective, and with partners. For us partnerships make a lot of sense, especially in exploration.” Petrobras’s $144 billion in sales last year was dwarfed by Exxon’s $421 billion, Chevron’s $223 billion and Shell’s $467 billion.
The producer’s long-term debt-to-capital ratio, a measure of funds available for projects, was 33.41 at the end of the fourth quarter, the highest since the first quarter of 2005, according to data compiled by Bloomberg.
By comparison, Exxon had a ratio of 4.33, Chevron had 8.04 and Shell had 13.14, the data show. Even so, Petrobras is expected to invest $45.7 billion over the next year, more than $34.7 billion at Exxon, $33.8 billion at Chevron and $34 billion at Shell, according to analyst forecasts compiled by Bloomberg.
Uruguay Vs. Brazil
BP and Total SA (FP) were two of the four companies that won acreage in neighboring Uruguay’s 2012 auction for offshore areas, underscoring the interest of the world’s biggest oil companies to expand in South America, T.J. Conway, a research and advisory manager at New York-based Energy Intelligence Group, said by telephone from Washington.
“The majors led the charge into Uruguay, and Brazil is sort of in that context,” Conway said. “Brazil is one of the preeminent offshore deepwater plays in the world.”
Brazil’s first sale of oil permits since 2008 will give Exxon a chance to resume exploration in the country after it drilled dry holes and returned a license last year in the so- called pre-salt region that holds the country’s largest discoveries.
Exxon also explored Brazil’s Foz de Amazonas basin in 2001 and 2002 and failed to find oil in one of the areas where the government will offer new licenses in May. Round 11’s 155,800 square kilometers is larger than oil auctions Trinidad, Mexico, Ecuador, Peru and Suriname have announced for this year.
Brazil hasn’t announced the acreage for a second offshore round and an onshore natural-gas round planned for later this year.
New Blocks
A total of about 230,000 square kilometers of exploration licenses were sold in Latin America in 2012, Wood Mackenzie said in a March report. Petrobras, the world’s No. 1 deep-water producer, has discovered high-quality oil in the Ceara and Sergipe basins, where new blocks will be available. The geology along Brazil’s equator also mirrors recent discoveries near the coast of Africa.
“People are waiting to see, as usual, what the 800-pound gorilla in the room does, and where Petrobras ends up with its budgeting and how much it is going to commit,” said Robert Gruendel, head of the energy practice at the DLA Piper law firm that has oil clients in Brazil.
“The reality of that is setting in.”
Local Content
While Brazil’s oil-rich geology has lured oil companies to Latin America’s largest economy, local content regulations and the lack of infrastructure in Brazil’s northeast may temper enthusiasm for new blocks, said Wagner Freire, a former exploration and production manager at Petrobras.
Companies often have to buy a majority of goods and services locally, depending on each project, as part of a government policy to spur economic growth and employment.
“No question there is good potential, but things are moving very slowly in the Brazilian oil business,” Freire said by phone from Rio de Janeiro.
“A lot of things have to be done with local content.” A combination of waning production at aging fields and losses from selling imported fuel below cost reduced Petrobras’s 2012 profits to the lowest since 2004.
The company plans to raise $9.9 billion selling assets in Brazil and abroad to help finance investments. Brazil’s four publicly-traded oil companies -- Petrobras, OGX Petroleo e Gas Participacoes SA, QGEP Participacoes SA (QGEP3) and HRT Participacoes em Petroleo SA -- were among the 71 companies that submitted paperwork to compete in the auction, the National Petroleum Agency said April 4.
“On balance I’d look at it as an opportunity if Petrobras is going to be a little bit more judicious in how it invests,” Gruendel said.
“There will be all sorts of opportunities, both to joint venture with existing partners in Brazil as well as to pursue greenfield operations.”
bloomberg.com
No comments:
Post a Comment