Petrobras shopping for $3 billion oil company in the Gulf of Mexico

By an OGJ Online Correspondent

RIO DE JANEIRO, Dec. 26 -- Petroleo Brasileiro SA (Petrobras) is ready to spend some $3 billion to purchase an oil company that will expand its production in the Gulf of Mexico, said the company's financial director Joao Nogueira Batista.

He said Petrobras, which is receiving proposals from banks, is looking for a medium-sized oil company with a daily production of 100,000 b/d of oil equivalent from the gulf.

Petrobras analysts said the recession in Europe, the US, and Japan, plus the situation in the Middle East, creates a favorable scenario for purchases in this region, particularly because Petrobras recently had record net profits.

If low oil prices and lower stock values for oil companies continue, an acquisition is possible during the first half of 2002, said Batista.

The purchase would help Petrobras boost oil production outside Brazil from a current 64,000 boe/d to its goal of 300,000 boe/d by 2005. The company is targeting the Gulf of Mexico because it has so far invested comparatively little in this highly promising area, said sources at Braspetro, Petrobras' international subsidiary.

A Petrobras source who requested anonymity told OGJ Online that the company would not be able to fulfill its target (part of the official strategic plan) of producing 300,000 boe/d by 2005 if it does not purchase an oil company abroad.

At present, Braspetro is producing only 10,500 boe/d in the Gulf of Mexico, compared to 22,000 boe/d in Colombia, 17,000 boe/d in West Africa (principally Angola), 10,000 boe/d in Argentina, and 8,000 boe/d in Bolivia, said company officials.

Petrobras' financial department is considering using the company's cash flow, which currently totals some $2 billion, or issuing bonds to finance the proposed purchase.

Utilizing the company's cash flow by remitting $3 billion abroad would pressure upward the value of the US dollar compared to Brazil's currency, officials said. Issuing bonds would precipitate high costs because it involves issuing American Depositary Receipts.

Braspetro is active in the US, Trinidad and Tobago, Colombia, Bolivia, Argentina, Nigeria, Equatorial Guinea, and Angola.

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