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Petrobras Inks Deal to Sell Assets Worth $2.2B to TOTAL
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Brazilian state-run integrated energy player Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) recently entered into an asset sale agreement with France-based TOTAL S.A. .
Per the deal, Petrobras will sell its upstream and downstream assets for $2.2 billion. The company will receive cash, carry and contingent payments as consideration. Petrobras will receive $1.6 billion in cash initially in 60 days and the remaining amount will be paid later.
Deal Details
On the upstream front, TOTAL will acquire stakes in the Lapa and Lara offshore prospects in the Santos Basin. The company will scoop up 35% of interest in the Lapa field, which was put into production a couple of months back. Petrobras will hold 10% stake in Lapa. The remaining stake in Lapa is held by Royal Dutch Shell and Repsol SA (REPYY - Free Report) . TOTAL will also acquire 22.5% stake in Lara field which is still under development. Petrobras will retain operation of the assets in Lara field holding 42.5% stake.
On the downstream end, TOTAL will acquire 50% interest in a pair of thermal co-generation plants in the Bahia area and a re-gasification unit in the LNG terminal. The agreement also includes pipeline transport capacity to supply gas to the power plants.
The companies will also evaluate exploration potential in other areas of Brazil and will jointly work on the development of new technologies.
Deal Motives
The deal will enable TOTAL to augur its footprint in Brazil which offers access to low cost sustainable resources. Thus, the company is likely to cut down on costs and focus on business development.
The sale of assets is part of Petrobras’ divestiture program of 2015–2018. The company plans to sell assets worth $35 billion over the said time frame. These divestment plans are in sync with the company’s strategy to reduce its debt and reinstate its investment grade rating and financial health. It is expected that the deal will have a positive impact on Petrobras as it mitigates the leverage and capex of the company along with presenting it with opportunities for future associations and partnerships with TOTAL.
Zacks Rank
Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm engaged in the exploration, refining, marketing, transporting, and distribution and biofuels segments. The company currently carries a Zacks Rank #5 (Strong Sell).
The company underperformed the Zacks categorized Oil & Gas Emerging Markets Integrated industry over the last three years. During the aforesaid period, shares of Petrobras declined 3.5% while the broader industry gained around 16%.
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Petrobras Inks Deal to Sell Assets Worth $2.2B to TOTAL
Brazilian state-run integrated energy player Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) recently entered into an asset sale agreement with France-based TOTAL S.A. .
Per the deal, Petrobras will sell its upstream and downstream assets for $2.2 billion. The company will receive cash, carry and contingent payments as consideration. Petrobras will receive $1.6 billion in cash initially in 60 days and the remaining amount will be paid later.
Deal Details
On the upstream front, TOTAL will acquire stakes in the Lapa and Lara offshore prospects in the Santos Basin. The company will scoop up 35% of interest in the Lapa field, which was put into production a couple of months back. Petrobras will hold 10% stake in Lapa. The remaining stake in Lapa is held by Royal Dutch Shell and Repsol SA (REPYY - Free Report) . TOTAL will also acquire 22.5% stake in Lara field which is still under development. Petrobras will retain operation of the assets in Lara field holding 42.5% stake.
On the downstream end, TOTAL will acquire 50% interest in a pair of thermal co-generation plants in the Bahia area and a re-gasification unit in the LNG terminal. The agreement also includes pipeline transport capacity to supply gas to the power plants.
The companies will also evaluate exploration potential in other areas of Brazil and will jointly work on the development of new technologies.
Deal Motives
The deal will enable TOTAL to augur its footprint in Brazil which offers access to low cost sustainable resources. Thus, the company is likely to cut down on costs and focus on business development.
The sale of assets is part of Petrobras’ divestiture program of 2015–2018. The company plans to sell assets worth $35 billion over the said time frame. These divestment plans are in sync with the company’s strategy to reduce its debt and reinstate its investment grade rating and financial health. It is expected that the deal will have a positive impact on Petrobras as it mitigates the leverage and capex of the company along with presenting it with opportunities for future associations and partnerships with TOTAL.
Zacks Rank
Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm engaged in the exploration, refining, marketing, transporting, and distribution and biofuels segments. The company currently carries a Zacks Rank #5 (Strong Sell).
The company underperformed the Zacks categorized Oil & Gas Emerging Markets Integrated industry over the last three years. During the aforesaid period, shares of Petrobras declined 3.5% while the broader industry gained around 16%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>