Brazilian oil and gas company Enauta may soon change the face of Latin American fossil fuels by establishing an independent oil and gas company with 3R Petroleum Óleo e Gás. This is the most recent of several ambitious moves by Enauta to expand its oil and gas operations in Brazil. In recent months, the firm has signed several contracts to acquire stakes in multiple offshore oilfields in the region, thereby boosting its production capacity. The proposal to merge with 3R, if accepted, could lead to the establishment of a major new independent company in the region.
The Brazilian oil firm 3R Petroleum Óleo e Gás announced it has temporarily halted talks with PetroReconcavo, over a proposed merger, opening the door for an alternative deal. Enauta proposed a new merger offer to 3R, which could lead to the creation of “one of the most diversified independent oil and gas companies in Latin America,” if accepted. If the merger goes ahead, the independent company will have a production capacity of over 100,000 bpd. The growing interest in 3R led its stocks to rise by 7.3 percent following the announcement.
This move by Enauta follows a growing ‘megamerger’ trend being seen worldwide. In the U.S., both Chevron and Exxon announced a major new deal in October, with Occidental following in December, and Diamondback in February. Meanwhile, small oil and gas companies in Brazil have been looking to consolidate operations following a widespread buy-up of assets formerly owned by state-owned Petrobras.
Enauta presented 3R with an all-stock offer. The deal would mean 3R shareholders hold 53 percent of the company, while Enauta shareholders would hold 47 percent. This is expected to provide a "balanced, five-year high organic growth portfolio with ability to add value in an environment of consolidation and resilience to commodity pricing cycles,” according to Enauta. The firm’s board of directors unanimously approved the proposal, believing the new independent company could attain a strategic positioning in domestic and international capital and banking markets. The firm believes that its deal is superior to that of PetroReconcavo in terms of “strategic positioning, governance, tangible synergies and from a risk management perspective.”
Enauta explained, “The transaction will lead to state-of-the-art governance, with diversified reference shareholders, a predominantly independent board of directors with an experienced executive team. There will be growth opportunities in offshore and onshore operations, mitigating operational, geological and regulatory risks, complementarity in teams, talent attraction and retention and strong adherence to ESG principles.”
This is just one of many moves by Enauta to expand its operations in recent months. In December the firm signed a deal with Petrobras to purchase two offshore oil and gas fields – Uruguá and Tambaú – in the Santos Basin, as well as natural gas pipeline infrastructure. This is expected to cost Enauta $10 million, with a potential $25 million more for oilfield development.
That same month, Enauta signed a contract with QatarEnergy Brasil to acquire a stake in the Campos Basin oilfields. The company expected to acquire the whole 23 percent stake previously held by QatarEnergy in the Abalone, Ostra and Argonauta oilfields, which comprise the Parque das Conchas. The zone is operated by Shell, which has a 50 percent equity stake. Production stands at around 35,000 bpd from 25 wells connected to the FPSO Espírito Santo platform. This is expected to cost Enauta a total of $150 million.
In March, Enauta also signed a deal with Houston-based Westlawn Americas Offshore (WAO) to purchase a 20 precent participating interest in the BS-4 concession for $301.7 million. Enauta released a statementsaying, “Partnerships are important drivers for value generation and risk-sharing in the development of megaprojects such as Atlanta and Oliva. Since Atlanta’s Phase I investment was sanctioned in March 2022, Enauta has been approached by several potential partners interested in joining the project… The signing of a 20 percent minority stake with WAO is aligned with principles of Enauta’s value generation strategy, capital allocation efficiency and management of a balanced high growth, high risk-adjusted return oil and gas portfolio.”
Enauta has been rapidly building up its oil and gas portfolio in Brazil’s offshore region, with the purchase of stakes in several oilfields. This will help boost production in the coming years and allow it to grow as an independent oil and gas company. This could be enhanced further by a potential merger with 3R Petroleum Óleo e Gás, if accepted, which would lead to the creation of a major Latin American independent with high production output and a significant stake in the Brazil region.
By Felicity Bradstock for Oilprice.com
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