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Petrobras Argentine Assets Sale Fails as Bids Miss Expectations

Petroleo Brasileiro SA, the most indebted publicly-traded oil company, rejected all offers for its Argentine assets after at least four months of talks as it seeks to raise $9.9 billion through sales and cost cuts.

“The executive board analyzed today the results of the negotiations for these assets and decided not to approve their sale under the offers that have been received,” Rio de Janeiro-based Petrobras said in a May 24 regulatory filing after markets closed in Sao Paulo, without offering further details. Petrobras had been receiving offers since at least January. Argentina’s Grupo Indalo was among the bidders.

Petrobras is seeking to raise funds for a $237 billion five-year business plan, with 62 percent of the funds earmarked for exploration and production as it taps offshore reserves constituting the world’s largest discovery this century. The company this month issued $11 billion in bonds to help finance the program in the largest-ever emerging markets issuance.

Petrobras Argentina SA, as the Argentine unit is called, is state-controlled Petrobras’s only publicly-listed unit. About 33 percent of the unit, acquired in 2002 from the Perez Companc family, is listed in Buenos Aires and also trades in New York through American Depositary Receipts. The company produces oil and gas in Argentina, refines fuels and has gasoline stations.

Cost-Cutting Plan

Petrobras this year scaled back its divestiture and cost-cutting plan from an original $14.8 billion target because the company had no experience as an asset seller and overestimated demand, Chief Executive Officer Maria das Gracas Silva Foster said March 15.

Earlier in the year Petrobras took out $7 billion in bank loans, which puts total debt raised this year at $18 billion.

On May 24, Petrobras announced the sale of a 12 percent stake in the off-shore Block 6 in Tanzania to Statoil ASA (STL) for an undisclosed amount. Petrobras will continue to operate the block and will hold a 38 percent stake. Royal Dutch Shell Plc (RDSA) will hold the remainder.

Petrobras has also sold assets in the Gulf of Mexico and Benin this year.

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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