Bloomberg News

Petrobras May Sell Stakes in Brazil Companies to Raise Cash

August 01, 2011

(Adds analyst comment in ninth paragraph.)

Aug. 1 (Bloomberg) -- Petroleo Brasileiro SA, the state- controlled oil producer, may sell stakes in Brazilian companies to raise cash for its $224.7 billion investment plan, Chief Executive Officer Jose Sergio Gabrielli said today.

Petrobras, based in Rio de Janeiro, is also looking to sell parts of exploration licenses in Brazil and abroad to meet a target of $13.6 billion in asset sales and cost cuts, Gabrielli told investors in London, without naming specific assets.

“We have several exploration and development blocks that we can farm out in Brazil and outside Brazil, most outside Brazil,” Gabrielli said. “The second type of asset is our share participation that we have in several companies.”

Petrobras has a 21.69 percent holding in Braskem SA, Latin America’s largest petrochemicals producer, with a market value of about $8.9 billion. The company also owns stakes in domestic natural gas distribution companies and power plants that could be sold to raise funds, according to Adriano Pires, head of the Rio de Janeiro-based Brazilian Center for Infrastructure.

Still, the oil company will probably raise most of the cash needed from selling exploration assets because petrochemical and natural gas distribution companies produce lower profits and are less attractive to buyers, Pires said in a telephone interview.

Petrobras rose 11 centavos, to 23.61 reais at 4:15 p.m. in Sao Paulo and declined about 14 percent this year, compared with a 15 percent drop for Brazil’s benchmark Bovespa Index.

Gulf of Mexico

Petrobras’s largest international exploration projects are in the Gulf of Mexico, Nigeria and Angola, according to the company, which is also investing in natural gas projects in Peru and Bolivia.

The company has 20 percent of the Tiber prospect that holds at least 1 billion barrels of recoverable resources, making it the largest discovery in the Gulf of Mexico in over a decade, Fernando Jose Cunha, Petrobras’s executive manager for the Americas, Africa and Eurasia, said in an interview June 23. BP Plc operates the field with a 62 percent stake.

“Petrobras management appears to have some specific assets in mind, otherwise they wouldn’t have given a specific number,” said Anisa Redman, an oil analyst at HSBC Holdings PLC. “They have assets in South America, Africa, Europe, and the Gulf of Mexico that they might consider selling.”

Petrobras expanded exploration outside of Brazil late last century to supply its Brazilian refineries amid a shortfall in domestic output. Then, in 2007, the company announced the largest discovery in the Americas in the last three decades in the so-called pre-salt region, located in deep water offshore.

The company plans to more than double domestic output by 2020 as it develops these fields, including the 6.5-billion- barrel Lula deposit, formerly known as Tupi.

--Editors: Dale Crofts, Carlos Caminada.

Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

To contact the reporters on this story: Karen Eeuwens in London at keeuwens@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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