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Chinese Allies to Pay Petrobras (PBR) $2.94B for Buzios Excess

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PetroleoBrasileiro S.A. or Petrobras (PBR - Free Report) has signed the Buzios Coparticipation Agreement with Présal Petróleo S.A. (PPSA) and its Chinese partners CNODC Brasil Petróleo e Gás Ltda. (CNODC) and CNOOC (CEO - Free Report) , which will control the coexistence of the Transfer of Rights (TOR) Agreement and the Production Sharing Contract for surplus oil found in the Buzios field offshore Brazil.

Under this new arrangement, China's state-owned CNOOC and CNODC will pay Petrobras $2.94 billion for the past development expenditures at the Buzios pre-salt field, easing investor concerns ahead of another pre-salt auction in December 2021.

Petrobras will control 92.666% of the Buzios reservoir at the commencement of the agreement while the remaining 3.667% interest will be owned by other partners apiece. The agreement's efficacy is contingent on the approvals from the National Petroleum, Natural Gas and the Biofuels Agency (ANP) followed by payment of the compensation to Petrobras by the CNOOC and CNODC partners.

In the November-2019 auction, Petrobras won 90% of the rights to explore and produce the excess volume of the Transfer of Rights from the Buzios field. The residual 10% interest was distributed evenly between CNOOC and CNODC. The three firms paid $17.1 billion for the right to generate more than the 3.15 billion barrels of oil equivalent that Petrobras had initially agreed to produce.

Also, recently, Petrobras signed a contract with the joint venture formed between the Italian oil field services company Saipem and South Korea's Daewoo Shipbuilding & Marine Engineering Co. Ltd. (DSME) for the construction of the floating production, storage and offloading (FPSO) vessel at the Buzios field. Notably, this will be the eighth FPSO unit to be constructed in the Búzios field of the Santos Basin pre-salt area.

The deal valued at $2.3 billion is the latest in a line of proposals announced to expedite the development of Buzios, which is widely regarded as the largest and the finest geological structure in Brazil's subsalt area.

Company Profile

Petrobras is the largest integrated energy firm in Brazil and one of the biggest in Latin America. The company’s activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons in addition to other energy-related activities.

Zacks Rank & Other Key Picks

Petrobras currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked players in the energy space include SilverBow Resources Inc (SBOW - Free Report) and Oasis Petroleum Inc. (OAS - Free Report) , each presently flaunting a Zacks Rank of 1. You can see  the complete list of today’s Zacks #1 Rank stocks here.

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