Petrobras CFO: No Chinese Yuan Bond Offer in Pipeline

RIO DE JANEIRO - Brazilian federal oil company Petroleo Brasileiro, or Petrobras, will look to borrow in currencies other than the U.S. dollar if it decides to sells bonds again this year, although Chinese yuan-denominated bond will likely have to wait.

"It's new to us," Petrobras Chief Financial Officer Almir Barbassa said about Chinese capital markets during a telephone interview Tuesday. "We're in the process of gathering knowledge." Petrobras has "nothing in the pipeline" in terms of a yuan-denominated issue, the executive added.

Petrobras is fresh off a $7 billion dollar-denominated bond issue last week that generated more than $25 billion in demand, a figure that Barbassa called "surprising." But investors looking for additional dollar-debt issues will have to wait until next year because last week's issue "is going to be the only one of the year," Barbassa said.

Now, Petrobras will seek financing opportunities in other currencies, such as the euro or pounds sterling, similar to its transactions last year, Barbassa said. In 2011, Petrobras sold $6 billion in dollar-denominated bonds early in the year before issuing EUR1.85 billion in euro-denominated bonds and GBP700 million in pounds sterling bonds later.

"Certainly, we're going to continue looking at these types of opportunities," Barbassa said. Petrobras will also look at possible issues in emerging or smaller markets, including Brazil, he added. "Given the knowledge of the company today, it's possible for us to access other markets," Barbassa said.

The funds Petrobras has already raised and will likely raise in future bond sales will support the company's ambitious $225 billion investment plan. The current plan, which covers 2011-2015, is focused on developing a promising ultra-deepwater region known as the pre-salt. The finds, which have been estimated to hold 50 billion barrels of crude, sit more than four miles deep under rocks, sand and a shifting layer of salt about 300 kilometers off the coast of Rio de Janeiro and Sao Paulo states.

Petrobras is already at work on the 2012-2016 investment plan, which should be ready by the middle of 2012, Barbassa said.

In addition to tapping global debt markets, Petrobras also plans to carry out the $13.6 billion divestment plan announced last year in the near future, Barbassa said. The evaluation of what assets to sell "continues, but we're starting to enter the implementation phase," Barbassa said. The company plans to put its Nansei Sekiyu refinery in Japan on the block, as well as other assets, the executive said. Sales should start taking place "in the first half [of 2012]," Barbassa said.

Petrobras is still closing the books on 2011, with the release of fourth-quarter earnings set for Thursday after markets close, so Barbassa declined to talk about production targets for 2012. But Petrobras expects to beef up its offshore drilling capacity in 2012--and that could certainly help raise crude oil output.

"We're going to end the year with more than 30 drilling rigs. We're going to add more than 10 rigs this year," Barbassa said.


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