PetroChina Buys Petrobras Assets in Peru for $2.6 Billion

Photographer: Rich Press/Bloomberg

Petroleo Brasileiro SA is the world’s largest producer in waters deeper than 1,000 feet. Close

Petroleo Brasileiro SA is the world’s largest producer in waters deeper than 1,000 feet.

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Photographer: Rich Press/Bloomberg

Petroleo Brasileiro SA is the world’s largest producer in waters deeper than 1,000 feet.

PetroChina Co. (857) will buy Petroleo Brasileiro SA (PBR)’s Peruvian assets for $2.6 billion, as the nation’s biggest energy company signaled business as usual following a government graft probe launched in August.

The Beijing-based company will take over three blocks of oil and gas fields in Peru from the Brazilian state-run producer known as Petrobras, it said in a statement to the Hong Kong stock exchange yesterday. Petrobras owns two blocks entirely and has a 46 percent stake in the third, according to the statement. PetroChina’s shares rose.

The deal marks the first acquisition by the state-owned company since the government announced graft investigations involving its executives, including former chairman Jiang Jiemin, in late August and early September. It also follows the conclusion this week of the communist party’s plenum in Beijing, which endorsed state dominance of the economy while pledging to boost the role of markets.

“There were concerns that the government probe into five former PetroChina officials may derail PetroChina’s overseas acquisitions and put some of its deals on hold,” said Gordon Kwan, a Hong Kong-based analyst at Nomura Holdings Inc. “This deal just proved PetroChina’s steps in overseas expansion haven’t been slowed down at all.”

The acquisition also shows that “rumors that the state will break up PetroChina into smaller companies were not true, otherwise it would not be able to do deals of this size,” Kwan said.

Shares Rise

China National Petroleum Corp., PetroChina’s state-owned parent, already owns oil and gas assets in Peru and Venezuela. If approved, it will be the second-largest acquisition in Peru after Royal Dutch Shell Plc (RDSA)’s purchase of liquefied natural gas assets from Repsol SA in February for $4.4 billion, according to data compiled by Bloomberg.

PetroChina rose 1.2 percent to HK$8.60 in Hong Kong at 11:52 a.m. while the city’s benchmark Hang Seng Index gained 0.8 percent. Petrobras climbed 2 percent to 19.94 reais in Sao Paulo yesterday.

The two companies won’t disclose the reserves in the blocks, PetroChina spokesman Mao Zefeng said in a phone interview. The Chinese explorer knows the assets well as it and CNPC have operated fields nearby, Mao said. The deal brings “good value,” he said, without elaborating.

“This will help PetroChina diversify its assets internationally and help them learn operating lessons from their partners that they can apply elsewhere,” said Nomura’s Kwan.

Most Acquisitive

CNPC, the most acquisitive energy company in Asia, entered Peru in 1993 and operates at least three oil and gas parcels, according to its website. Peru is the first country where CNPC worked on an overseas project.

The assets called Lot 57, Lot 58 and Lot X are located in Peru’s Amazon jungle and PetroChina’s stake represents 12.1 billion barrels of oil equivalent, said Simon Powell, head of oil and gas research at CLSA Ltd.

“On paper this doesn’t look like it was an expensive deal for PetroChina,” he said. “But this is going to require significant investment in building infrastructure to get it out.”

Petrobras, the most indebted publicly traded oil company, has been selling assets to help fund projects in Brazil’s deep waters. The Peru deal takes Petrobras’s divestments this year to $7.4 billion, said Bank of America Corp. analysts Frank McGann and Vicente Falanga Neto.

“We view the asset sale positively,” McGann and Falanga Neto wrote in a note to clients yesterday, reiterating a buy recommendation for Petrobras. “It should help Petrobras to reduce financing needs and streamline its portfolio.

Exploration Assets

The Brazilian government-controlled company, which entered Peru in 1996, produces about 16,000 barrels a day in the country and holds stakes in exploration assets in the Maranon, Huallaga and Madre de Dios basins, according to its website.

Lot 57, in which Petrobras owns 46 percent, is operated by Repsol SA. (REP) Repsol said last year that the block’s Kinteroni gas field holds at least 2 trillion cubic feet of natural gas. It announced July 25 that the field is ready to start production.

Lot 58 has 56.6 trillion cubic meters of contingent natural gas resources, according to Petrobras’s website.

Petrobras took a 40 percent stake in an offshore field called Libra, the largest discovery in Brazil’s history, in a government auction on Oct. 21.

The state-run producer, which last month reported a 40 percent drop in third-quarter profit, is seeking to finance plans to spend $237 billion through 2017 to build refineries and develop deep-water fields. The company has also requested fuel price increases to phase out subsidies on imported gasoline and diesel.

To contact the reporters on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net; Benjamin Haas in Hong Kong at bhaas7@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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