This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: Petrobras $2.1B in Asset Sales Disappoints

NEW YORK (TheStreet) -- Brazilian oil giant Petroleo Brasileiro Petrobras (PBR) said last Friday, Aug. 16, its board approved the sale of $2.1 billion in oil and gas, petrochemical and power plant assets as part of its $9 billion divestiture program.

The sale included Petrobras' 35% stake in block BC-10 in the Campos Basin, known as the Parque das Conchas, to China's Sinochem for $1.54 billion.

Analysts at Tudor Pickering Holt & Co. Securities wrote in a note Monday that the sales came in lower than the firm's valuation estimates, including Petrobras stake in Parque das Conchas, which it calculated as being worth $1.7 billion. But it added that the move will help fund the seller's "massive" pre-salt capital expenditure plan.

Simmons & Co. said Monday the sales also will provide some much needed relief to Petrobras' "bloated" balance sheet, whose debt level rose to 34% of capitalization in the second quarter.

Petrobras' partners in Parque das Conchas, 50% holder and operator Royal Dutch Shell (RDS.A) and 15% owner Oil and Natural Gas Corp. of India, have preemptive rights that can be exercised within 30 days after notification. The sale must clear the Brazilian Antitrust Authority, Brazil's National Petroleum, Natural Gas and Biofuels Agency and China's National Development and Reform Commission.

Sinochem's purchase continues a trend of Chinese companies investing in Brazil's oil sector. In January Sinochem agreed to buy a 10% stake in five offshore oil blocks in Brazil's Espírito Santo basin from Anglo-French Perenco SA. In 2010, it agreed to pay just over $3 billion for a 40% stake in Brazil's Peregrino oilfield bought from Norway's Statoil (STO).

In addition to Parque das Conchas, Petrobras agreed to sell Petroquímica Innova SA, a maker of ethylbenzene, styrene and polystyrene for use in home appliances, packaging and fiberglass in Triunfo, to Videolar and its majority shareholder for R$870 million ($372 million) and R$23 million in debt assumption. That deal has to be cleared by shareholders as well as the Brazilian Antitrust Authority.

Petrobras also signed farm-out contracts amounting to $185 million for its 33% stake in block MC 613 (Coulomb), 100% of block GB 244 (Cottonwood) and 60% of block EW 910, all in production and in the U.S. Gulf of Mexico. It didn't name the buyers. Shell operates the Coulomb field with a 67% stake while W&T Offshore Inc. owns 40% of EW910. Those deals must clear third party preemptive rights and approval by the Bureau of Ocean Energy Management.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,915.07 -70.54 -0.42%
S&P 500 1,964.68 -8.15 -0.41%
NASDAQ 4,396.2040 -22.83 -0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs