Brazilian state-run energy major, Petroleo Brasileiro SA, or Petrobras (PBR) closed the sale of its 35% stake in the Parque das Conchas or block BC-10 after receiving approval from the Brazilian Petroleum Agency (:ANP). Europe’s oil giant, Royal Dutch Shell plc (RDS.A) purchased a 23% stake in the block, raising its net holding to 73%. The remaining 12% of Petrobras’ stake was purchased by Indian energy explorer ONGC, raising its stake to 27%.
Petrobras had originally intended to sell its 35% stake to Sinochem Group – a conglomerate in China – for a total consideration of roughly $1.54 billion. However, partners Shell and ONCG exercised their right of first refusal and became owners of the additional interest. Petrobras too benefited from this deal that closed at $1.636 billion, higher than what the company would have received from Sinochem.
This divestment supports Petrobras’ asset divestment target of $9.9 billion. Also, the asset sale would generate funds to meet its $237 billion five-year investment plans.
The Parque das Conchas started production in 2009 and has a current output of about 50,000 barrels a day, after the second phase of the project came online in October. In 2013, the block contributed around 8,600 barrels of oil per day (Bbl/d) to Petrobras’ production. The operator of the block, Shell had sanctioned the third phase of development for the project in July which is expected to increase output from the field by around 8,000 Bbl/d.
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company operates through six segments: Exploration and Production, Refining, Transportation and Marketing, Distribution, Gas and Power, Biofuels and International.
The company currently holds a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.
In addition to Petrobras, one can consider other energy sector stocks such as Harvest Natural Resources Inc. (HNR) and Clayton Williams Energy, Inc. (CWEI). Both these currently sport a Zacks Rank #1 (Strong Buy).