Further on the Enauta merger proposal with 3R Petroleum

(PN) Enauta announced that its Board of Directors approved the presentation of a proposal for the business combination with 3R Petroleum. The operation could create one of the main independent operators in Brazil and Latin America, with production potential that could exceed 100 thousand barrels of oil equivalent per day – in line with the volume of the largest Brazilian independent, PRIO. Enauta asked for exclusivity for 30 days for the 3R board to dedicate itself to its proposal. 3R, in turn, accepted the request and said it has already started evaluating the business. The letter with the merger proposal sent to 3R is signed by the chairman of the Board of Directors of Enauta, Mateus Tessler, and the company’s CEO, Décio Oddone.

In a statement to the market, Enauta said that it also sees that the merger opens up the opportunity to reach operated reserves of more than 700 million barrels in a highly complementary and diversified portfolio. “The combination results in a portfolio with scale, balanced and high organic growth over the next five years, with the capacity to add value in a consolidation environment and with resilience to price cycles,” said the company.

Enauta’s proposal involves the exchange of shares between companies in order to optimize the transaction, with a simplified structure and execution, without the need for carve-outs, waiver fees and restructuring of guarantees. During the 30-day exclusivity period in negotiations with Enauta, the two companies will carry out confirmatory measures. The transaction is also subject to the usual precedent conditions for transactions of the same nature and others that may be agreed by the companies, such as obtaining legal and regulatory approvals, including the Administrative Council for Economic Defense (CADE), among others.

Enauta also said that it sees opportunities for growth in offshore and onshore operations, mitigating operational, geological and regulatory risks, with the ability to react to monetary and commodity cycles, complementarity in teams, ability to attract and retain talent and high adherence to principles ESG.

WITH ENAUTA’S PROPOSAL, NEGOTIATIONS WITH PETRORECONCAVO ARE SUSPENDED

The proposal made by Enauta moves and shakes the market. This is because, to remember, 3R was already in talks for a possible business combination with PetroReconcavo – an idea presented by the Swedish company Maha Energy, which owns 5% of 3R’s capital.

According to the plan outlined in a letter, the intention was to consolidate all of the two companies’ onshore fields under PetroReconcavo, resulting in gains of US$1 billion in synergies. In turn, 3R would maintain its current offshore assets, and shareholders would receive shares in PetroReconcavo. However, after Enauta anticipated and requested exclusive negotiations with 3R, conversations with PetroReconcavo were suspended, at least for now.

“PetroReconcavo S.A. informs its shareholders and the market in general that it was notified yesterday by 3R Petroleum Óleo e Gás S.A. of the decision of its Board of Directors to suspend negotiations with the Company due to the receipt of a proposal from Enauta Participações S.A. , sent through a letter, of a broad business combination transaction between the two companies”, said the oil company in a statement.

It is not yet known what the outcome of the possible merger with PetroReconcavo will be, but the end of Enauta’s statement to the market leaves a clear message: “The completion of this combination (with 3R) does not make new transactions with other companies in the sector, capable to accelerate the creation of value for all shareholders.” In the market, there are those who understand that Enauta may also be winking at PetroReconcavo. It remains to be seen whether PetroReconcavo’s management would accept being part of a possible merger involving 3R and Enauta.