Petrobras Looking For Record Share Offering (PBR)

The global equity market is about to get ready to absorb one of the world’s largest securities offerings ever.  Petroleo Brasileiro SA (NYSE: PBR), or the state-run ‘Petrobras,’ has hired a slew of bankers to underwrite a massive securities offering.  The SEC filing lists Bank of America Merrill Lynch, Bradesco BBI, Citi, Itaú-BBA, Morgan Stanley, and Santander as the registered placement agents for the offering.  The size is already a large group, but due to the recent woes in the markets and the daily headline risks out there it seems that Petrobras should have an even larger underwriting group than this.

As far as the details, these are still absent.  The SEC filing noted that Petrobras “is in a quiet period and unable to provide clarifications or to discuss any information related to the proposed public offer with the market and other stakeholders until the announcement regarding the closing of the offer has been published… The Company will continue to disclose data on the normal course of its activities and information about the public offer to the market, under the applicable regulations.”

So we have no time and have no size of the offering.  Not officially.  If the market were to comply and if this was a US-based company, this offering could be made in the next week or two.  Last week, the company hinted at a late-July or an early August offering, but this is a moving target.

As for the actual size?  This is not known in exact terms, but our indications are for about $50 billion.  The most recent Dow Jones figures noted analyst expectations of between $50 billion and $60 billion.  This offering will help finance the bold $200+ billion investment program laid out by the company for the 2010 to 2014 growth plan.

The offering could be made faster if the Brazilian securities regulators make the final approvals and if the politicians get on the same page.  Petrobras will receive the exploitation rights of about 5 billion barrels of crude oil.  It also appears that minority shareholders will be offered shares in the offering to maintain the same ownership percentages in the company.  One additional hold-up is that the transfer of these oil rights has been approved by Brazil’s Congress.  Needless to say, there are more than a few debates about who should get what and at what price.

BP’s Gulf of Mexico disaster is another wild card that has yet to be considered by investors. Environmental groups have much more leverage against offshore drilling now, even if there is no direct tie at all between these two issues.  More than a week ago, one of the company’s executives noted how the BP spill will alter regulations on the industry all around the world.

At $37.00 per ADR this morning, the 52-week range for Petrobras is $31.21 to $53.46.

JON C. OGG