Petrobras prepares for mega auction of the Transfer of Rights surplus


Petrobras intends to use the billions of reais it will receive by renegotiating the Transfer of Rights agreement to buy new assets in the surplus auction of the same. The president of the company, Roberto Castello Branco, said yesterday that he does not have the resources to de-lever the company and that the oil company will reduce its debts based, above all, on a “more aggressive” program of divestitures. In this sense, the main asset is in the plan of sale of the refineries, whose business model will be defined in three months.

Castello Branco announced yesterday that it expects to reach an optimal level of debt in up to three years. According to him, the oil company will seek to reduce its leverage, measured by the ratio between gross debt / Ebitda (earnings before interest, taxes, depreciation and amortization), for levels between 1 and 1.5 times. The state-owned company ended 2018 with a gross debt / Ebitda ratio of 2.7 times.

“We are going to make every effort, take all measures, develop initiatives so that we can finally achieve a stable situation, having low indebtedness and remunerating the capital of our shareholders, we can do that in two to three years,” said the executive, during a press conference.

Petrobras’ past operations worked with a different concept of leverage, measured by the net debt / EBITDA ratio. In 2018, the state company closed the year with a leverage of 2.34 times, below the target of 2.5 times – reduction possible thanks to the increase, above expected, in international oil prices, which helped offset the fact of the company has reached less than 40% of the sales target of assets, of US $ 21 billion for  2017-2018.

Castello Branco pointed out that the company’s deleveraging strategy for the coming years will be based on three pillars: divestitures, cost cutting and increased production. In addition, he said that Petrobras intends to reduce its cash position from the current $ 14 billion to $ 10 billion.

“The Transfer of Rights assignment, what we get from indemnification, in the review of the contract, is not in our deleveraging plans. We are not counting on the resources of the assignment to de-lever the company … Our greatest interest is actually to participate in the auction [ of surpluses] and we have the opportunity to expand production in the future, “he said.

Yesterday, the National Energy Policy Council (CNPE) defined that the auction will be held on October 28. Under the rules, the winners will have to pay Petrobras compensation for the company’s investments in the discovery of surplus volumes – reserves that exceed the 5 billion barrels that the state company is entitled to produce in the pre-salt, as part of the Transfer of Rights agreement , of 2010, which allowed the Union to increase its share in the oil company’s capital.

When asked whether Petrobras intends to increase its asset sales target of US $ 26.9 billion by 2023, Castello Branco said that by promising a “more aggressive” divestment program, he meant that the idea is try to divest faster and more actively, but that does not have estimates of what you can raise from it. “Who will determine the values ​​of divestitures is the market,” he said.

The main asset of the divestment program will be the sale of refineries. He said the business model is still being structured but anticipated that the oil company does not intend to hold minority interests in the units that are included in the plan. “If we sell a refinery, we want to sell 100% of it,” he said.

He also said that the company wants to increase the number of potential buyers. The original disinvestment project, which was announced in the Pedro Parente administration in April 2018, provided for the sale of 60% of two refining centers, one in the South and the other in the Northeast, and denied the participation of companies that have as main activity trading of oil and other derivatives, known as tradings.

“The model from last year, we do not agree [with it], because it excludes buyers.” “We do not want to exclude anyone, so it’s out of the question.

He reiterated that the state-owned company holds 98% of the country’s refining capacity but sees scope to reduce that share to about 50%. Under the divestment plan announced last year, the company’s market share would be reduced to 60% of capacity.

In addition to refining, Castello Branco said that the sale of the Associated Gas Carrier (TAG), valued at around US $ 8 billion, should be completed in the short term. Petrobras CFO and investor relations director Rafael Grisolia also said that the thermoelectric plants should enter the company’s divestment program and that the company also wants to increase divestitures of onshore and shallow water mature fields.

Source: Valor

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