Auction winners of the Transfer of Rights Surplus will compensate Petrobras for prior investments

4/26/2019

The government took another step in the preparations for the mega-auction of the surplus of the Transfer of Rights assignment and defined the premises that will be used to calculate the financial compensation owed to Petrobras for the investments made by the state company in the areas that will be offered in the bid, scheduled for October 28. The amounts will be paid by companies that win the round and sign a partnership agreement with the Brazilian oil company in the Búzios, Atapu, Itapu and Sepia fields, in the Santos Basin pre-salt.

The surplus is the uncovered volume of oil that exceeds 5 billion barrels which Petrobras is entitled to produce in the pre-salt, as part of the Transfer of Rights assignment – a contract signed in 2010, within the operation that led to the increase of the Union share in the state capital.

The Ministry of Mines and Energy was responsible for defining the guidelines for calculating compensation. The real amount to be paid to Petrobras and the date for payment remain open, since the final amount will be negotiated directly between the company and its future partners.

International consultancy Wood Mackenzie estimates that this figure could reach $ 20 billion. In addition to the financial compensation, still to be calculated, the Brazilian oil company will receive another US $ 9 billion from the Federal Government for revision of the agreement.

Under the rules of the auction, companies that buy the surplus volumes will enter in a partnership agreement with Petrobras in the fields, and will compensate the state company for the billions of dollars invested in the development of the auctioned areas.

The payment also aims to offset a probable fall in the company’s cash generation. This is because, with the entry of the new partners in the bidding fields, there will be a revision of Petrobras production curve in the fields of the Transfer of Rights assignment – the volume produced by the platforms of these areas, destined 100% for Petrobras, will be divided with the future members who sign the partnership agreement.

The ordinance published yesterday by the MME defined that the compensation to Petrobras will be calculated “in order to maximize the Union’s Net Present Value and maintain Petrobras’ NPV”. It was also defined that any taxes on the receipt of the compensation will be borne by Petrobras’ partners in the partnership agreements. The calculation should also consider oil prices of US $ 72 per barrel for valuation of the field cash flow.

In addition to compensation to Petrobras, oil companies interested in participating in the auction will have to pay a subscription bonus to the Union for the acquisition of surplus. Last week, the National Energy Policy Council (CNPE) set the October tender bonuses at R $ 106.5 billion.

The largest area to be offered is Búzios, with a bonus of R $ 68.194 billion and a minimum percentage of 23.25% for the so-called oil-profit (percentage of oil to be delivered to the Union in the sharing agreement, as a criterion for best bid of the auction). For Sepia, the bonus is R $ 22.859 billion and the percentage is 27.65%. Atapu, in turn, will have a bonus of R $ 13.742 billion and a percentage of 25.11%. The smallest area is that of Itapu, which will be tendered with bonds of R $ 1.766 billion and oil-profit of 19.82%.

Source: Valor

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