Petrobras (PBR) Raises $1.5B In IPO, Eyes 3 Offshore Blocks
Zacks Investment Research | Dec 14, 2017 10:39PM ET
Brazilian state-run Petróleo Brasileiro S.A. or Petrobras (NYSE:PBR) recently announced that its fuel distribution unit Petrobras Distribuidora S.A. has managed to raise $1.5 billion (R$5.02 billion) in an initial public offering ("IPO") even though it priced the shares at R$15, the lower end of its suggested price range.
The company increased the size of the offering to make the most of it. The listing was Brazil’s largest since July when the local unit of supermarket chain Carrefour (PA:CARR) SA (CRRFY) received R$5.12 billion. The IPO has been a topic of discussion between Petrobras and the financial institutions for two years.
The success of the IPO signifies that the company has emerged from the threat to its credit rating caused by the multibillion-dollar money laundering and bribery case.
In another development, the company also disclosed its intention to exercise its right of first refusal over three of the overall blocks, which will be auctioned in June 2018. Petrobras can opt for at least 30% stake in each pre-salt blocks offshore Brazil. The company is eyeing the Dois Irmãos, Três Marias and Uirapuru blocks. The move is expected to strengthen the exploration portfolio of Petrobras.
About the Company
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company’s activities include: exploration, exploitation and production of oil from reservoir wells, shale and other rocks, as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities. The company operates in six segments: Exploration and Production (E&P), Refining, Transportation and Marketing, Distribution, Gas and Power, Biofuels and International.
Considering Brazil's huge pre-salt oil reserves – estimated at 9.5 to 14 billion barrels of oil equivalent and widely thought to be the most important oil find in recent years – we believe Petrobras is in an enviable position to maintain an impressive production growth profile for years to come.
However, the company has massive debt loads as it carries a net debt of more than $88 billion, with net debt-to-capitalization ratio of approximately 51%. As such, leverage remains a key area of concern for the firm.
In addition, Petrobras has lost 6.2% of its value year to date against 5.6% growth of its Zacks Investment Research
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