BRASILIA, (Reuters) – Brazil’s government will charge state oil company Petrobras $8.51 per barrel for crude reserves to be used in a $43 billion oil-for-shares swap, a price seen as high that could limit interest in a related share offer.
The government will trade 5 billion barrels of oil for company shares, Finance Minister Guido Mantega said on Wednesday, in an operation linked to a stock issue for private shareholders that could raise as much as $25 billion more in cash.
The price is considerably higher than the $5 to $6 per barrel markets see as fair, possibly leaving Petrobras <PETR4.SA> raising less cash than it had hoped as it advances plans to tap vast but hard-to-reach oil fields deep below the ocean floor.
“It’s the biggest transaction of its kind,” Mantega told reporters in the capital Brasilia. He said terms and conditions of the operation will be announced on Sept. 3.
Oil for the exchange will come from six fields, including key deep water discoveries such as Franco and Tupi that are buried under a layer of salt in a region known as the subsalt that President Luiz Inacio Lula da Silva has called a “gift from God.”
“That price of $8.51 per barrel is going to make the shares drop,” said Adriano Pires, an energy expert at the Rio de Janeiro-based Brazilian Infrastructure Center.
Monica Araujo of the brokerage Ativa said the price per barrel “seems very high, a lot higher than the expectations.” She had pegged the price near $7 per barrel.
Investors worry that the high price per barrel will leave Petrobras overpaying for the assets and dilute shares. The company had pushed for a price closer to $6 per barrel.
The plan has become the financial cornerstone of the company’s $224 billion five-year investment plan meant to turn Brazil into a major oil exporter.
Petrobras hopes to complete both the swap and the share sale within its September target to avoid overlapping with national elections on Oct. 3.
Petrobras in the coming days will likely hold a roadshow to convince skeptical investors to join the operation. Uncertainty about the plan has pushed its shares down 25 percent since the start of the year.
The share offering is so large it is already helping strengthen Brazil’s real currency on the expectation of massive capital inflows.
Government leaders have said they hope to increase the total stake in the company’s capital from around 30 percent to as much as 40 percent, a move that has unnerved investors but plays well to Brazilian nationalist sentiment.
“The government is increasing its stake in the company by twisting the arms of the shareholders,” said Francois Moreau, an independent energy analyst based in Rio de Janeiro.
“The company’s commercial mission is being replaced by a political mission.”