Petrobras May Delay $25 Billion Share Sale, Two Government Officials Say

Petroleo Brasileiro SA’s $25 billion share sale may be delayed as Brazil’s state-run oil producer and the government start negotiating the financial terms of a related oil-for-stock swap, according to two government officials familiar with the matter.

President Luiz Inacio Lula da Silva is gathering the information necessary to determine the best timing for the transaction, a person close to Lula said on the condition of anonymity because a final decision hasn’t been made yet. The government and Petrobras will seek to agree on a price and date of the share sale that benefits both parties, according to a second official, who also declined to be identified.

Rio de Janeiro-based Petrobras previously postponed the offering to September from July as it waited for a price to be set on about 5 billion barrels of deepwater oil reserves that it plans to buy from the government in exchange for stock.

Petrobras and the government are treating the negotiations like a “commercial transaction,” the company said yesterday in a statement. “It’s natural that both parties would seek through negotiations to maximize their results,” the company said.

Lula received separate independent valuations on the crude reserves yesterday from Petrobras and Brazil’s oil regulator, known as the ANP, according to a joint statement from the Energy and Finance ministries and the cabinet. The government has requested more information, according to the statement.

September Share Sale

Petrobras said yesterday it’s working to carry out the share sale by the end of next month. The targeted date for the sale, which was scheduled to take place by Sept. 30, isn’t definitive, the two government officials said.

Investors are waiting for the final valuation of oil in the offshore Franco field to determine how much stock Petrobras needs to sell in its offering. Petrobras plans to issue enough stock to allow the government and minority investors to maintain their stakes. A higher per-barrel oil price would force Petrobras to sell more shares to buy the reserves.

The IPO market in Brazil has fallen this year as Petrobras’s planned offering crowds out other potential share sales in Latin America’s biggest equity market. The offering is so large that companies prefer to wait to go public, Guilherme Paes, head of investment banking at Banco BTG Pactual, said in an interview.

Equity sales by Brazilian companies totaled $15.2 billion this year, according to data compiled by Bloomberg. Last year, 32 share sales took place in Brazil, amounting to $22.8 billion.

Negotiations Start

Energy Minister Marcio Zimmermann said that the government and Petrobras will have about four days to negotiate a final price for the oil reserves as of yesterday. The government plans to announce the price of the reserves by Aug. 31, he said.

Haroldo Lima, head of the ANP, said in an Aug. 12 interview that a “reasonable price” for Petrobras to pay for the reserves would be $8 a barrel.

Petrobras fell 3.3 percent to close at 26.78 reais yesterday in Sao Paulo trading. The stock has plunged 27 percent this year, more than the 2.5 percent drop for Brazil’s benchmark Bovespa index.

Petrobras yesterday lost its position as the biggest company in Latin America by market value to iron-ore producer Vale SA amid concern the offering will dilute investors’ holdings. Chief Executive Officer Jose Sergio Gabrielli said in March the company may raise as much as $25 billion from minority investors in the sale.