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Brazil's HRT Buys 60% Stake in Offshore Polvo Oil Field from BP

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RIO DE JANEIRO - Brazilian oil start-up HRT Participacoes em Petroleo SA said Monday it would acquire a 60% stake in the offshore Polvo heavy oil field from the local unit of BP Plc for $135 million.

The deal, which is subject to regulator approval, would mark HRT's transformation from a pure exploration play into a small oil producer. Polvo produces about 13,000 barrels of heavy crude oil a day, according to HRT. The Brazilian unit of Denmark's Maersk Oil holds the remaining 40% of Polvo.

BP, meanwhile, sheds an asset that held very little interest for the company after its acquisition in 2011. BP bought Polvo as part of a larger, $3.2 billion deal to acquire the Brazilian assets of Devon Energy Corp. BP had actively sought to sell off its stake in Polvo, looking toward exploring other deep-water prospects acquired from Devon.

HRT, which had a cash position of about $500 million at the end of 2012, said that it would finance a large part of the purchase price via a loan with Credit Suisse.

Given HRT's focus on conserving its cash to fund its exploration plans, the deal likely increases the chance HRT will be nothing more than a bit player in Brazil's upcoming 11th-round auction of oil and natural gas exploration concessions set for May 14-15. In March, HRT Chief Executive Marcio Rocha Mello said in an interview that the company was in talks with several companies about partnerships to participate in the auction, but "without using cash."

HRT recently started drilling its first well of the coast of Namibia. The West African nation is the crown jewel of HRT's portfolio of oil and natural gas exploration blocks. Geologists believe the highly prospective region off Namibia's coast could hold billions of barrels of oil under similar conditions to Brazil's subsalt, where oil was discovered trapped under a thick layer of salt. The two areas were connected millions of years ago.

The company plans to drill three wells off the coast of Namibia this year, while negotiating with other companies to sell an additional stake in the blocks to fund a fourth well.

HRT operates 21 blocks in the Solimoes Basin of Brazil's remote Amazon region with a 55% stake, while Russian partner TNK-Brasil holds the remaining 45%. The two firms have joined forces with state-run energy giant Petroleo Brasileiro to find a strategy to generate cash from natural gas discoveries made in the region.

Copyright (c) 2012 Dow Jones & Company, Inc.

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