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BofA In On $6 Billion Financing Deal for Petrobras Subsidiary Bid

The Macquarie Group Ltd. is financing a bid on Petrobras assets using financial assistance from Bank of America and Banco Bradesco, according to a new report by Bloomberg.

The bridge-loan could be as big as $6 billion, though it will mostly be offered in reais, Brazil’s main currency, in order to avoid currency hedges, anonymous sources said.

The Brazilian state-owned subsidiary for sale is called TAG, and it operates completely in the Brazilian currency, which means the loan could give Macquarie a leg up over several other bidding groups.

Sao Paulo-based Itausa – Investimientos Itau SA will compete with the TAG deal in a consortium with Sydney-based Macquarie, Canada Pension Plan Investment Plan, and Singapore-based GIC Private Limited, sources close to the matter said.

French utility major Engie is leading another bidding group, and Mubadala Development also seeks to lodge a separate bid on the Petrobras subsidiary.

Transportadora Associada de Gas (TAG) owns a 2,800-mile network of pipelines across 10 Brazilian states. Its sale would help meet one-third of Petrobras’ divestment plan to pull itself out of debt.

New revenues for Petrobras and Brasilia are expected from pre-salt layers in the near future. But the fields can be complex and costly to fully exploit. However, the potential held by the pre-salt belt is tremendous. Its basins have some of the highest drilling success rates globally, and the national petroleum agency, the ANP, believes that if effectively exploited, the pre-salt area could easily double Brazil’s oil reserves.

Industry insiders estimate that the largest oil field in the pre-salt acreage, the Libra field, has recoverable oil resources of up to 15 billion barrels. For these reasons, during 2017, pre-salt production became a major driver of Brazil’s growing oil output. And for the first time ever, in December 2017, it was responsible for over half of the nation’s total oil output.

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By Zainab Calcuttawala for Oilprice.com

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