Jun 29, 2020
In the middle of one of the biggest crises in the oil and gas sector, two new companies specializing in recovering mature fields will start operations this year in the Brazilian market. However, 3R Petroleum and Trident Energy will face a very different scenario than the two expected when they signed, in 2019, their respective contracts with Petrobras for the acquisition of assets in the country.
The timing will require adjustments. The expectation is that investments in the recovery of the acquired assets, which are already in a phase of decline, will have a slower pace than initially forecast.
When the two companies signed their contracts with Petrobras, in mid-2019, the price of a barrel of oil was negotiated above US $ 60. With the deterioration of demand, triggered by the pandemic of the covid-19, the commodity came to be negotiated in April below $ 20 and now revolves around $ 40.
In the assessment of Bain & Company, the current crisis should establish a new level of prices, lower, in relation to the pre-crisis. According to the consultancy, oil shocks caused by geopolitical issues (such as the 1991 Gulf War) or by economic recessions (such as the 2008 subprime crisis) tend to recover previous price levels. The current shock, however, is more similar to the 1986 and 2015 crises, which are more structural.
It is in this new market context that 3R Petroleum took over the operation of the Macau (RN) cluster this month, which produces around 4,000 barrels / day of oil. The oil company is controlled by Starboard Restructuring Partners, a private equity manager that bought this year Ouro Preto Oil and Gas, from businessman Rodolfo Landim.
The president of 3R, Ricardo Savini, said that, in the face of the oil shock, the company initially chose to postpone to 2021 the revitalization interventions in Macau originally planned for this year. With the recent appreciation of the commodity, the company is already considering anticipating part of the activities that would remain for next year. “With the Brent price recovery, we decided to continue with the planned investments and we will invest still in 2020. We are optimistic about the market recovery, because the return on investment from the onshore is immediate,” said Savini to Valor.
A similar path is being taken by PetroRecôncavo, which is not quite a newcomer, but which in 2019 took an important step of expansion in the country, by purchasing the Riacho da Forquilha (RN) cluster from Petrobras. The company’s president, Marcelo Magalhães, affirms that the crisis caught the company with the “foot in the accelerator” in the activities of revitalization of the asset and that it was necessary to demobilize rigs and to postpone investments to preserve the cash. According to him, however, the oil company has now started to reactivate rigs. The expectation is to invest between 70% and 80% of the initial program this year.
Magalhães said that the company does not regret the deal, closed for US $ 384 million, and that, on the contrary, it maintains interest in new acquisitions. “The investment plan of US $ 150 million in five years is maintained. It is just a matter of changing the timing in which we will reach the peak of the production curve,” he said.
In addition to 3R Petroleum, the list of newcomers in mature fields in Brazil includes Trident Energy – an oil company specialized in mature fields that was created in 2016, with a focus on Latin America and Africa, and which has a support of US $ 600 million from private equity Warburg Pincus. The company operates in Equatorial Guinea and in 2019 signed a US $ 851 million contract with Petrobras to purchase the Pampo and Enchova hubs, in shallow waters in the Campos Basin.
This month, Trident Energy obtained authorization from the National Petroleum Agency (ANP) for the acquisition of assets, one of the last steps necessary to conclude the deal. According to the regulator, the Pampo and Enchova development plan foresees investments in the order of US $ 1 billion, with the potential to add 203.5 million barrels of oil to reserves.
Who also recently debuted in Brazil was Perenco, which took over at the end of 2019 the Pargo, Carapeba and Vermelho hubs in the Campos Basin, after paying US $ 398 million, but which in the first months of operation saw the scenario market changes completely. In May, the company’s president in Brazil, Timothee de Reynal, said that he has made “many efforts” to reduce his costs on acquired assets, to take operations out of the red and make them viable with an oil price between US $ 20 and $ 30 a barrel.