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Petrobras To Divest 30% Stake In Frade Field To PetroRio

ByZacks Investment Research
Published 12/01/2019, 10:41 PM
Updated 07/09/2023, 06:31 AM

Of late, Petroleo Brasileiro S.A. aka Petrobras (NYSE:PBR) entered into an agreement with PetroRio Jaguar Petróleo Ltda wherein the former will sell its 30% stake in Frade concession to the latter.

The divestment also included the sale of the complete interest owned by Petrobras Frade Inversiones SA (PFISA), a unit of Petrobras, in the company Frade BV, which operates the offshore assets used in developing the Frade field production.

Proceeds from the sale will be received in part payments. Initially, a tranche of $7.5 million will be earned upon inking the deal. The remaining $92.5 million will be obtained on culminating the transaction, contingent upon certain adjustments due. Further, an amount of $20 million will be secured provided a prospective discovery is made in the field.

Petrobrasis committed to investing in deepwater and ultra-deepwater assets, especially pre-salt, which is expected to generate highest pecuniary return. With the Frade field’s divestiture, the company will be able to concentrate more on its portfolio.

Petroleo Brasileiro S.A.- Petrobras Price

Petroleo Brasileiro S.A.- Petrobras price | Petroleo Brasileiro S.A.- Petrobras Quote

PetroRio Jaguar Petróleo Ltda, a unit of PetroRio SA, currently holds 70% of the Frade’s concession. With the closure of the transaction, the Frade field, located in the Campos Basin, north coast of the Rio de Janeiro state in Brazil, will be wholly owned by PetroRio.

The acquisition is expected to make a significant impression on PetroRio, leading to more optimized production, which will add about 27 million barrels to PetroRio’s 2P reserves with increase in the company’s daily output by 6,000 barrels.

The transaction is subject to the receipt of pending approvals from the Administrative Council for Economic Defense (CADE) and the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

Headquartered in Rio de Janeiro, Petrobras is one of the largest energy players riding high on the back of its outstanding portfolio, particularly in Brazil’s pre-salt reservoirs and projects impressive average annual output growth through 2024. However, the company recently reported break-even earnings for third-quarter 2019 compared with the Zacks Consensus Estimate of 28 cents and the year-ago quarterly income of 26 cents. These unfavorable comparisons stem from lower average realized commodity prices and decline in oil product sales, which more than offset excellent production growth and the drop in lifting costs.

Zacks Rank & Key Picks

Petrobras currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are World Fuel Services Corporation (NYSE:INT) , HollyFrontier Corporation (NYSE:HFC) and Phillips 66 (NYSE:PSX) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Petroleo Brasileiro S.A.- Petrobras (PBR): Free Stock Analysis Report

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