Petrobras’ (PBR) big share sale has killed the company’s price. Petrobras has the oil reserves, technology, and soon — the final piece – the money to begin a massive expansion of its offshore oil reserves. And its price is down 25%. From Canada’s Globe and Mail…
Brazilian state oil company Petrobras (PZE-N15.720.463.01%) will sell up to $64.5-billion in new stock – one of the largest in capital markets history – to raise funds for the world’s biggest oil exploration investment plan.
The company will offer 1.59 billion new preferred shares and 2.17 billion new common shares, Petrobras said in a statement published in Valor Economico newspaper, for an operation that includes a $43-billion state-backed oil-for-shares swap.
At Thursday’s closing price for the stocks, the company would raise 67.8 billion reais ($39.2-billion) from the sale of common shares and another 43.8 billion reais ($25.4-billion) from the preferred shares, making it one of the world’s largest- ever stock offerings.
Petrobras expects to begin bookbuilding Sept. 3, and price the share sale on Sept. 23.
The plan has become the financial cornerstone of the company’s $224-billion five-year investment plan meant to turn Brazil into a major oil exporter by tapping oil buried deep under the ocean floor in a region known as the subsalt.
The company faces skepticism by investors who have questioned the high price for the oil reserves to be used in the state-backed oil-for-shares swap arrangement, which has sparked fears Petrobras may be overpaying for the assets and diluting shares.
Under the terms of the $43-billion oil-for-shares swap, Petrobras said on Wednesday it agreed to exchange part of the stock to be issued for development rights to 5 billion barrels of offshore oil at a price of $8.51 per barrel – far above the $5 to $6 per barrel that markets saw as fair.
The swap will endow Petrobras’ assets with valuable oil reserves.
If you’re ever going to buy into Petrobras, now would be the time. It’s not the perfect oil company (if there is such a thing). But it has the one thing most oil majors lack: big oil reserves which are growing.
