Petrobras In Uncharted Territory With $58 Billion Sale: Real M&A
(Bloomberg) -- Petroleo Brasileiro SA’s $58 billion asset sale proposal would be unprecedented for the oil industry -- and for good reason. It may be impossible to pull off.
The plan, released last week by the Brazilian state-run oil company known as Petrobras, calls for $15.1 billion in divestments by the end of 2016 and an additional $42.6 billion by 2018, part of which will come from restructuring. The last company to come close to Petrobras’s target was BP Plc, when it sold more than $30 billion in a downsizing strategy after the Deepwater Horizon oil spill.
Chief Executive Officer Aldemir Bendine’s strategy is to cut debt without abandoning plans to develop oil discoveries 200 miles off the coast of Rio de Janeiro. Selling assets would help Petrobras avoid an alternate debt-reduction strategy that frightens shareholders -- a dilutive share offering while the stock is near its lowest in a decade. But the assets are coming to market as a collapse in oil prices weighs on asset values and the financial wherewithal of would-be buyers.
“On a net basis, people are looking to sell, not buy,” said Guy Baber, an analyst at Simmons & Co. Separately, “Petrobras as a company over the past 10-plus years has chronically fallen short of the targets that they set.”
Petrobras didn’t respond to a request for comment. Its shares rose 3 percent to 11.90 reais at 1:11 p.m. in Sao Paulo.
Net Debt
The asset sales would almost halve by 2020 the company’s ratio of net debt to earnings before interest, taxes, depreciation and amortization, or Ebitda, Petrobras said in a filing last week. Currently that ratio is 5 times Ebitda, the highest for Petrobras since at least 1997, according to data compiled by Bloomberg.
The new divestment strategy -- a significantly upsized version of a plan first unveiled earlier in the year -- is intended to preserve Petrobras’s investment-grade credit rating, after Standard & Poor’s and Fitch Ratings assigned a negative outlook to its BBB- score.
123
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- Libya's Surprise Oil Minister Change Throws Spotlight on Output
- Oil Seals Quarterly Gain in Tightening Market
- Oman Sees Increasing Ship-to-Ship Transfers of Russian Oil Bound for India
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- UK Oil Regulator Publishes New Emissions Reduction Plan
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- PetroChina Posts Higher Annual Profit on Higher Production
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- McDermott Settles Reficar Dispute
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- USA Commercial Crude Oil Inventories Increase
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Oil Demand Outpaces Expectations, Testing Calculus on Peak Crude
- House Passes Protecting American Energy Production Act
- TotalEnergies Restarts Production in Denmark's Biggest Gas Field
- USA Oil and Gas Job Figures Jump
- Republican Lawmakers Say IEA Has Abandoned Energy Security Mission
- Blockchain Demands Attention in Oil and Gas
- Houthis Warn Saudi Arabia of Retaliation If It Backs USA Attacks
- Macquarie Sees USA Oil Production Exiting 2024 at 14MM Barrels Per Day
- Summer Pump Prices Set to Hit $4 a Gallon Just as Americans Hit the Road
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea