Malaysian state oil company Petronas agreed to pay $850 million for a stake in two Brazilian offshore oil blocks, bolstering billionaire Eike Batista who is selling assets to keep his energy, mining, port and shipbuilding empire afloat.
Petronas PETR.UL, which is expanding abroad to shore up future earnings as production slows at home, also said it has an option to buy a 5 percent stake in OGX Petroleo e Gas SA (OGXP3.SA), the Batista company that controls the blocks.
The OGX sale extends a Petronas buying spree that includes a $5.1 billion acquisition of Canadian oil and gas company Progress Energy Corp. Petronas gets 40 percent of the BM-C-39 and BM-C-40 blocks northeast of Rio de Janeiro.
The blocks contain the Tubarão Martelo, or “Hammerhead Shark” oil field, which is under development, and three oil accumulations being evaluated for development, according to OGX documents.
After the deal was announced, shares in OGX and its sister companies in Batista’s EBX Group jumped in Sao Paulo trading Wednesday, with OGX rising more than 8 percent.
Batista was Brazil’s richest man until lower-than-expected output from OGX, an oil exploration and production company founded in 2007 and the flagship of his EBX Group, sent the company’s shares plunging.
Troubles at OGX also pulled down the market value of other EBX companies, cutting Batista’s fortune by $20 billion in the past year. He is now under pressure to divest up to half of his 60 to 70 percent stake in EBX so that his firms can find funds for expansion.
In early afternoon trading EBX-controlled mining company MMX Mineração e Metalicos SA (MMXM3.SA) rose 3 percent on Wednesday, shipbuilder OSX Brasil SA (OSXB3.SA), which depends on OGX for much of its expected revenue, rose 3.1 percent and LLX Logistica SA (LLXL3.SA), a port operator leasing land to OSX for its shipyard and OGX for oil storage and transport, rose 2.1 percent.
OGX trimmed earlier gains of 8 percent to rise 5.6 percent to 2.06 reais in Sao Paulo.
MMX Energia SA (MPXE3.SA), a natural gas and electricity company in which OGX shares natural gas output in Brazil, rose 1.4 percent.
The sale “addresses our main short-term concern with OGX shares, which is the need of alternative sources of cash in 2013,” Bruno Montanari and Guilherme Bellinetti, oil and gas company analysts with Morgan Stanley in Sao Paulo, said in a note to investors.
While complete terms of the sale were not revealed, the Petronas option to buy 5 percent of OGX is priced at 6.3 reais a share. That stake would be worth about $160 million, based on the share price before the deal was announced.
“The interest demonstrated by Petronas … to acquire 5 percent in our company in the future shows the quality of our team of executives and our opportunities for growth,” OGX Chief Executive Luiz Carneiro said in a statement.
The sale, though, was made under pressure. While it alleviates OGX’s immediate needs for capital, it gives Petronas assets on the cheap, Morgan Stanley’s Montanari and Bellinetti said.
The pair values the oil and natural gas resources in the BM-C-39 and BM-C-40 blocks purchased by Petronas at $10 a barrel, or 23 percent below their own $13.1 a barrel “base case” estimate.
The deal may also demand that Batista and OGX prove their assets’ value. Citing a report in Brazil’s Valor Economico newspaper, the Morgan Stanley analyst said OGX may only receive $250 million from Petronas up front, followed by $500 million on first output and $100 million contingent on output levels.
For Batista, 56, who holds several power-boat championship titles and once predicted he would be the world’s richest man by 2015, the Petronas sale is only the latest in a flurry of deals aimed at shoring up his companies and his personal fortune.
On March 7, he announced a partnership with Brazilian investment bank BTG Pactual Group (BBTG11.SA), run by fellow Brazilian billionaire Andre Esteves. The bank has helped to find buyers for stakes in EBX companies and improved their access to capital.
On March 28, German energy company E.ON SE (EONGn.DE) more than doubled its stake in Batista’s natural gas producer MPX to 36 percent from 11.7 percent, for $1 billion.
{Agencies}
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