Petroleo Brasileiro Petrobras SA (ADR) (PBR) Seals $1.6B Block BC-10 Sale

Brazilian state-run energy major, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), or Petrobras 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 (ADR) (NYSE: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%.

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR)

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) 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 Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR)’s 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, Royal Dutch Shell plc (ADR) (NYSE:RDS.A) 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, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) 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 Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), one can consider other energy sector stocks such as Harvest Natural Resources, Inc. (NYSE:HNR) and Clayton Williams Energy, Inc. (NASDAQ:CWEI). Both these currently sport a Zacks Rank #1 (Strong Buy).

Disclaimer: This article is written by Zacks Equity Research and originally published at Zacks.com.

WILLIAMS(C)ENGY (CWEI): Free Stock Analysis Report

HARVEST NATURAL (HNR): Free Stock Analysis Report

PETROBRAS-ADR C (PBR): Free Stock Analysis Report

ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report


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