Blog Coverage Petrobras and Total Cement Their Partnership with New Agreements and Future Plans

LONDON, UK / ACCESSWIRE / December 23, 2016 / Active Wall St. blog coverage looks at the headline from Brazil’s state-run oil company Petroleo Brasileiro S.A. – Petrobras (NYSE: PBR) and France-based Total S.A. (NYSE: TOT). According to an article published by Reuters on December 21, 2016, both companies signed an “Asset Package Agreement” on December 21, 2016. As per the new agreement Total will acquire Petrobras’ assets valued at approximately $2.2 billion which included stakes in oilfields and two thermal power stations. The new agreement also sees both companies partnering in other areas like operations, research and technology in the Upstream and Downstream sectors. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The Current Asset Package Agreement

The current agreement is drawn on the basis of The Strategic Alliance agreement that the two companies had signed in October 2016. The total value of the various asset sales under the current agreement is $2.2 billion. Petrobras will receive $1.6 billion in cash on completion of the deal and the balance amount will be paid by Total at pre-agreed intervals. All the agreements need to be completed and signed within 60 days and are subject to regulatory approvals, including the Brazilian Federal Accounting Court (TCU), and other closing conditions.

Total will acquire 22.5% stake in Petrobras interest in Block BMS11 in the Iara area (Sururu, Berbigão and Oeste de Atapu fields). Petrobras is the operator and a majority partner in the consortium which owns the Iara concession with 65% stake. The other members are Shell with 25% stake and GALP with 10% stake. Post the stake sale to Total, Petrobras will continue to be the majority partner with 42.5% stake.

Total will also acquire 35% in Lapa field in Block BM-S-9 from Petrobras. Post the stake sale, Total will be the operator and Petrobras will own 10% stake in this concession.

Both companies will jointly use the Bahia Regasification Terminal. Petrobras’s Bahia Terminal is an LNG import terminal, located in Baía de Todos os Santos, Salvador, in the state of Bahia. Total will be able to share its global experience in exchange for use of the terminal. The deal includes pipeline transport capacity that will allow Total to supply gas to the plants.

Total will acquire 50% interest in Rômulo de Almeida and Celso Furtado thermal plants, located in Bahia, which have the energy generation capacity of 322 MW.

Total will offer Petrobras an option to take a 20% stake in block 2 of Perdido Foldbelt area in the Mexican Gulf of Mexico. Total partnered with Exxon to acquire the concession via a winning bid from the Mexican Government.

Total and Petrobras will also conduct joint studies in the exploratory areas in the Equatorial Margin and in the southern area of Santos Basin, and construct a technological partnership in geological processing and subsea engineering.

Strong history of partnership

Total and Petrobras are already working as partners in 19 consortiums worldwide in exploration and production. In Brazil, they are partners in development of the giant Libra field, the first production sharing contract in the Brazilian pre-salt Santos basin. Apart from this both companies are partners on Chinook field in the US Gulf of Mexico, the deepwater Akpo field in Nigeria, and the gas fields of San Alberto and San Antonio-Itau in Bolivia, as well as in the Bolivia-Brazil gas pipeline. The current partnership and stake sale will boost the existing relationship of both companies.

Reasons for Petrobras divestment

Petrobras has been looking to reduce its staggering debts which were approximately $122.65 billion as on the end of 3Q2016. Petrobras has taken the divestment route to reduce its debt. In 2015-16 it raised $15.1 billion through divestments and has lined up $19.5 billion in asset sale for 2017-2018. The current agreement is also a step in the direction of reducing its debt.

Petrobras has also been hit by the corruption and money laundering scandal which came to light in 2013 followed by arrest of executives and officials in 2014-2015. The scandal spilled over to US where a class-action lawsuit was filed by the investors of Petrobras in US for covering corruption and publishing misleading accounts. It is staring at a settlement which could be over a billion dollar adding to its existing debt.

The reducing oil prices in the last few years have also affected the Company’s ability to get good prices for its assets and attract credible investors.

Stock Performance

At the closing bell, on Thursday, December 22, 2016, Petrobras’ stock closed the trading session at $9.88, marginally down 0.50% from its previous closing price of $9.93. A total volume of 14.12 million shares have exchanged hands. Petrobras’ stock price advanced 7.63% in the past three months, 46.59% in the last six months, and 117.62% in the previous twelve months.

At the close of yesterday’s trading session, Total’s stock price climbed 1.07% to end the day at $50.06. A total volume of 3.36 million shares were exchanged during the session, which was above the 3-month average volume of 1.93 million shares. The company’s stock price advanced 7.73% in the last month, 9.03% in the past three months, and 12.89% in the previous six months. Furthermore, since the start of the year, shares of the company have surged 17.88%. The stock is trading at a PE ratio of 31.29 and has a dividend yield of 5.23%. The stock currently has a market cap of $127.25 billion.

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