The government will trade 5 billion barrels of oil for
company shares, Finance Minister Guido Mantega said on Wednesday, in an
operation linked to a stock issue for private shareholders that could raise as
much as $25 billion more in cash.
The price is considerably higher than the $5 to $6 per
barrel markets see as fair, possibly leaving Petrobras raising less cash than
it had hoped as it advances plans to tap vast but hard-to-reach oil fields deep
below the ocean floor.
"It's the biggest transaction of its kind,"
Mantega told reporters in the capital Brasilia. He said terms and conditions of
the operation will be announced on Sept. 3.
Oil for the exchange will come from six fields, including
key deep water discoveries such as Franco and Tupi that are buried under a
layer of salt in a region known as the subsalt that President Luiz Inacio Lula
da Silva has called a "gift from God." "That price of $8.51 per
barrel is going to make the shares drop," said Adriano Pires, an energy
expert at the Rio de Janeiro-based Brazilian Infrastructure Center.
Monica Araujo of the brokerage Ativa said the price per
barrel "seems very high, a lot higher than the expectations." She had
pegged the price near $7 per barrel.
Investors worry that the high price per barrel will leave
Petrobras overpaying for the assets and dilute shares. The company had pushed
for a price closer to $6 per barrel.
The plan has become the financial cornerstone of the
company's $224 billion five-year investment plan meant to turn Brazil into a
major oil exporter.
Petrobras hopes to complete both the swap and the share
sale within its September target to avoid overlapping with national elections
on Oct. 3.
Petrobras in the coming days will likely hold a road show
to convince skeptical investors to join the operation. Uncertainty about the
plan has pushed its shares down 25 percent since the start of the year.
The share offering is so large it is already helping
strengthen Brazil's real currency on the expectation of massive capital
inflows.
Government leaders have said they hope to increase the
total stake in the company's capital from around 30 percent to as much as 40
percent, a move that has unnerved investors but plays well to Brazilian
nationalist sentiment.
"The government is increasing its stake in the
company by twisting the arms of the shareholders," said Francois Moreau,
an independent energy analyst based in Rio de Janeiro.
"The company's commercial mission is being replaced
by a political mission." Preferred shares of Petrobras, the company's most
widely traded class of stock, closed up 3.72 percent to 27.03 reais on the Sao
Paulo stock exchange.
The plan comes amid a presidential election campaign in
which Lula's candidate, Dilma Rousseff, is heading for victory on pledges to
continue his economic legacy and plow the oil wealth into education and
development.
Shareholder participation will be crucial for Petrobras
to shore up its balance sheet, which has been stretched by a combination of a
two-month delay in the oil-for-shares plan and heavy borrowing to finance its
ambitious offshore plans.
While the oil swap will win Petrobras valuable new
reserves, the share sale will provide the only cash in the operation. The total
value of the operation - the combined value of the share sale and the oil swap
- is capped around $85 billion.