Petrobras Posts Biggest Two-Day Decline Since May on Discount Speculation

Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, posted the biggest two-day drop in four months on speculation it may sell shares at a discount in a $75 billion offering later this month.

Petrobras fell 1.5 percent to 26.45 reais at the close of trading in Sao Paulo at 4 p.m. New York time, extending its two- day decline to 6.5 percent, the most since May 4.

Investors are betting the offshore oil driller, based in Rio de Janeiro, will offer shares at a price lower than today’s to ensure sufficient demand, said Oliver Leyland, who helps oversee $1.1 billion including Petrobras stock at Mirae Asset Global Investments Brasil. The company plans to announce the price Sept. 23 for the sale meant to fund its investment plan and the purchase of crude reserves from the government.

“It’s hard to understand why people would be buying shares today,” Leyland said by phone from Sao Paulo. Mirae plans to participate in the offering. “There’s doubt on what level the final offering will be priced, with no visibility on the book building or demand at this point.”

A Petrobras press officer, who asked not to be named because he’s not authorized to speak publicly, declined to comment.

Because priority subscriptions will be allocated based on the number of shares held on Sept. 17, and given settlement time, investors had to buy Petrobras yesterday to be able to participate in the first round of the sale, Leyland said.

“Sellers should outweigh buyers in the short term,” he said.

‘Not Very Attractive’

The share sale, set to be the world’s largest, is “not very attractive” in part because of profitability concerns, said Jeff Lu, a money manager at China Asset Management Co., the nation’s biggest fund manager overseeing about $45 billion. Petrobras had the smallest increase in net income among the world’s largest oil producers last quarter.

Lu declined to say whether he will buy shares in the offering. He spoke in an interview at the Latin America China Investors Forum in Beijing.

The sale includes $42.5 billion in stock that Petrobras will use to buy 5 billion barrels of undeveloped offshore oil reserves from the government. The company also needs to finance $224 billion in investments through 2014.

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net