Breaking News

Tweet TWEET

Petrobras Investors Seek Agreement on Oil Below $7.50 a Barrel, Frost Says

Petroleo Brasileiro SA investors will be “pleased” if the company and Brazil agree on a price below $7.50 a barrel for 5 billion barrels of government-owned oil, said Ted Harper of Frost Investment Advisors.

A price higher than $7.5 a barrel for the undeveloped reserves in deep waters of the Atlantic Ocean would be based on “aggressive assumptions” such as high future oil prices and low borrowing costs, Harper, who helps manage about $6.8 billion at Frost in Houston, said today in an interview. Petrobras is set to buy the reserves from the government in return for stock.

“If you’re somewhere south of $7.5 a barrel, investors will be pretty pleased with that, the higher you get above that number the more difficult it will be for investors to view this as a palatable type of arrangement,” Harper said by telephone.

Petrobras and government officials are negotiating the final price ahead of Petrobras’s planned share sale, set to occur by Sept. 30. Haroldo Lima, head of Brazil’s petroleum regulator, said in an Aug. 12 interview that $8 a barrel for the reserves would be a “reasonable price.”

A higher price means Petrobras will have to issue more shares to buy the oil, diluting earnings per share, Harper said.

Petrobras is looking to finance $224 billion in investments through 2014, the largest investment plan of any oil company. Petrobras is developing oil fields including Tupi, the largest discovery in the Americas since Mexico’s Cantarell in 1976.

To contact the reporter on this story: Peter Millard in Rio de Janeiro at Pmillard1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.