Petrobras May Issue $40 Billion of Shares, BNDES Says

Petrobras May Issue $40 Billion of Shares, BNDES Says

March 3 (Bloomberg) -- Petroleo Brasileiro SA’s biggest minority shareholder said the state-controlled company may issue up to $40 billion in shares, less than some analysts forecast, as part of a plan to swap stock for oil off Brazil’s coast.

The capitalization “could be $35 billion to $40 billion,” said Luciano Coutinho, president of the BNDES, Brazil’s state development bank and a Petrobras shareholder. “It will be the largest public offering ever in global markets,” Coutinho said today in a Bloomberg television interview.

Credit Suisse, in a Feb. 10 note to clients, forecast the share sale to reach as much as $50 billion, with about $30 billion of stock going to the government in exchange for 5 billion barrels of offshore oil and the rest offered to minority shareholders. JPMorgan Chase & Co. analysts in a note yesterday forecast the capital increase at $40 billion.


Brazilian President Luiz Inacio Lula da Silva sought to boost state control over offshore reserves and Petrobras after the company’s discovery of the Tupi field, the biggest crude find in the Americas since 1976. The lower house approved the bill to transfer the oil in exchange for shares yesterday and will send the measure to the Senate, which will have 45 days to pass it, Energy Minister Edison Lobao said today in an interview.

“Within Estimates”

The BNDES’s forecast is “within the market’s estimates,” said Rogerio Poppe, who helps manage 9 billion reais ($4.77 billion) in assets at BNY Mellon in Rio de Janeiro. “The important thing is that we’re getting closer to this.”

The final value of the share sale will depend on the price of oil the government will sell to Petrobras. The government will hire independent auditors to calculate the value.

“I think any number right now is a pure guess; nobody knows for sure how much the barrels of oil are worth,” said Christian Audi, an analyst with Banco Santander SA in New York.

Rio de Janeiro-based Petrobras is investing $174.4 billion over five years to boost output and tap deposits off Brazil’s coast in the so-called pre-salt region. Tupi, discovered in 2007, may hold as much as 8 billion barrels, Petrobras has said.

A Petrobras press official, who asked not to be identified because of company policy, declined to comment on the value of the share sale.

Petrobras rose 3 centavos, or 0.1 percent, to 35.15 reais in Sao Paulo trading. The stock earlier touched 35.82 reais, the highest since Jan. 20.

‘Viable’ Offering

The share offering “is perfectly viable,” Coutinho said in the interview at Bloomberg’s office in London. “Although it’s a very sizeable one, we think there is liquidity and there is appetite in the market for the operation.”

Bank of America Corp., the largest U.S. lender, raised $19.3 billion in December in the biggest sale of stock or preferred shares by a publicly-listed U.S. company since at least 2000, according to data compiled by Bloomberg. The Charlotte, North Carolina-based bank used the offer to repay rescue funds and free itself from restrictions after accepting assistance from the Troubled Asset Relief Program. In May, Bank of America had raised $13.5 billion in response to government stress tests.

BNDES may increase its stake in Petrobras through the stock sale, Coutinho said. Minority investors will have the option to buy shares proportionate to their current stake.

Petrobras Chief Financial Officer Almir Barbassa said Feb. 1 that the company expects to raise between $15 billion to $30 billion from minority shareholders.

Market Reaction

“It depends on how strongly the market will react,” Coutinho said. “We will be prepared to increase our participation if it’s the case, but at least we’ll keep the participation we have now.”

BNDES holds 7.7 percent of outstanding shares, the Petrobras press official said.

Petros-Fundacao Petrobras de Seguridade, the pension fund of Petrobras employees, also plans to buy shares in the offering, Petros President Wagner Pinheiro told reporters in Rio de Janeiro today.

--With assistance by Maria Luiza Rabello in Brasilia and Alex Ragir, Peter Millard and Helder Marinho in Rio de Janeiro. Editors: Jessica Brice, Carlos Caminada.

To contact the reporters on this story: Laura Price in London at lprice3@bloomberg.net; Juan Pablo Spinetto in London at jspinetto@bloomberg.net