Petrobras Will Raise Up to $60 Billion in Share Issue

Petrobras Will Raise Up to $60 Billion in Share Issue

March 15 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-run oil company, will issue as much as $60 billion of new stock, most of which will go to the government in exchange for oil rights, Energy Minister Edison Lobao said.

“Petrobras has no funding problems,” Lobao told reporters today in Sao Paulo. He said the company will issue between $40 billion and $60 billion of new stock. “The share sale will help us to diversify our funding sources.”
President Luiz Inacio Lula da Silva sought to boost state control over Petrobras and deepwater oil deposits after the company discovered the Americas’ largest oil find in more than three decades. Under legislation proposed by Lula, Brazil’s government is seeking to swap 5 billion barrels of oil in the pre-salt region for Petrobras shares.

Rio de Janeiro-based Petrobras is spending $174.4 billion in the five years through 2013 as it prepares to tap the offshore fields. The company’s Tupi field, the biggest discovery since Mexico’s Cantarell since 1976, may hold as much as 8 billion barrels of oil, Petrobras has said.

Lobao said the Senate will likely approve the oil-rights transfer within two months, allowing Petrobras to sell shares by the end of June. Marcello Paixao, a portfolio manager at Principia Capital Management in Sao Paulo, said the share sale is more likely in the second half of the year.

Lobao is “probably being very optimistic,” Paixao, who helps manage 90 million reais ($51 million), including Petrobras stock, said today in a telephone interview. “Market people are expecting these changes to be approved, but doubt it will happen in the first half.”

Larger Estimate

Lobao’s estimate tops previous forecasts. Luciano Coutinho, president of Brazil’s state development bank, known as BNDES, said March 3 that Petrobras may raise $35 to $40 billion.

Credit Suisse, in a Feb. 10 note to clients, forecast the share sale to reach as much as $50 billion. About $30 billion of the stock would go to the government in exchange for the oil with the rest offered to minority shareholders, according to Credit Suisse.

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.

Petrobras fell 29 centavos, or 0.8 percent, to 36.77 at 3:15 p.m. New York time. The stock has gained 33 percent in the past year, compared with a 77 percent gain for Brazil’s benchmark Bovespa index.

To contact the reporters on this story: Lucia Kassai at lkassai@bloomberg.net; Peter Millard in Rio de Janeiro at at Pmillard1@bloomberg.net
Last Updated: March 15, 2010 15:33 EDT"