Statoil buys Petrobras 66% stake in BM-S-8 offshore block in Santos basin for $2.5 billion

Jul 29, 2016 12:00 AM

Statoil ASA, Norway's biggest oil company, will buy an offshore oil block in Brazil from Petroleo Brasileiro SA for $2.5 billion, seizing on lower asset valuations amid a price slump to make its biggest acquisition since 2011.

Statoil will buy Petrobras's operating interest of 66 percent in the BM-S-8 offshore license in the Santos basin, which it estimates to hold between 700 million and 1.3 billion barrels equivalent of recoverable oil, according to a statement from the Norwegian driller.

“Through this acquisition we are accessing a world class asset,” Statoil Chief Executive Officer Eldar Saetre said in a written statement. “We strengthen our position in Brazil, one of Statoil's core areas due to its large resource base and excellent fit with our technology and capabilities.”

The purchase adds another asset to Statoil's Brazilian portfolio, which includes exploration blocks and about 100,000 barrels a day of production, bolstering prospects for the next decade and affirming the company's intention to expand internationally despite the market turmoil. It's Statoil's biggest acquisition since buying Brigham Exploration Co. for $4.4 billion in 2011 to access U.S. shale oil resources.

Needed Cash

Close all those tabs. Open this email. Get Bloomberg's daily newsletter. Sign Up For state-run Petrobras, the energy giant at the center of Brazil's biggest political scandal, the sale will provide much-needed cash after it slashed planned investments by half last year to navigate lower oil prices and free up funds for paying off debt. The company is also defending itself against a class-action lawsuit in the U.S. stemming from a vast pay-to-play scandal, where company executives took bribes from a group of contractors.

The BM-S-8 license holds a “substantial part” of the Carcara oil discovery, which stretches into acreage to the north expected to be offered to explorers in a licensing round next year, Statoil said. The license also has exploration upside that could “significantly increase its resource base,” the company said.

“This transaction does not strike us as especially expensive,” with a value of about $3.80 a barrel for the resources acquired, assuming the mid-point of the estimated range, Jefferies Group LLC said in a note to clients. Still, “it further strains what we would deem one of the tightest cash cycles in the peer group.”

Strategic Cooperation

Statoil will pay half of the acquisition price upon closing of the transaction and the rest when “certain milestones” have been met, it said. The effective date is July 1, 2016. The two companies are also in talks about long-term strategic cooperation, Statoil said.

The transaction “is significant for the industry as it represents the first example of Petrobras giving up operatorship of Brazil's pre-salt Santos basin assets,” Jefferies said.

Petrobras shares have almost tripled since late January as oil prices have rebounded and it has announced a series of asset sales to free up cash to pay off debt. The company last month was said to be close to selling an 81 percent stake in a natural gas pipeline network in Brazil for nearly $6 billion to a consortium led by Brookfield Asset Management Inc.

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