Petrobras to purchase Argentina's Petrolera Santa Fe from Devon

Petroleo Brasileiro SA (Petrobras) has signed a definitive agreement to acquire full control of Petrolera Santa Fe, the Argentine subsidiary of Oklahoma City-based Devon Energy Corp., for $89.5 million.

Aug 14th, 2002

By an OGJ correspondent
RIO DE JANEIRO, August 14 -- Petroleo Brasileiro SA (Petrobras) has signed a definitive agreement to acquire full control of Petrolera Santa Fe, the Argentine subsidiary of Oklahoma City-based Devon Energy Corp., for $89.5 million.

The Brazilian state oil giant earlier this year disclosed its intent to acquire the Argentine firm (OGJ Online, June 17, 2002).

Petrobras Pres. Francisco Gros said this purchase, coming on the heels of his company's announcement that it plans to acquire a controlling interest in Argentina's Perez Companc SA for $1.8 billion (OGJ Online, July 24, 2002), is "part of Petrobras's international expansion strategy."

He said the acquisition should be completed in the fourth quarter, following approvals by the Argentine regulatory authorities.

Petrolera Santa Fe explores for, develops, and produces oil and natural gas. During 2001, the company produced 6,040 b/d of oil and 22.5 MMcfd of gas from its Sierra Chata, Refugio Tupungato, Atamisqui, and El Tordillo fields in Argentina. In addition, Petrolera Santa Fe operates the concession containing El Mangrullo field, yet to enter into production.

Based on SPE criteria, Petrobras calculated Petrolera Santa Fe's proven reserves as of Dec. 31, 2001, at 84.7 million boe.

Strategic move
With this acquisition, Petrobras increases its portfolio of upstream investments by incorporating Petrolera Santa Fe's assets with its current production assets in the Argentine province of Salta and its exploration assets in the Neuquen basin. The transaction generates synergies and balances Petrobras' portfolio in Argentina, which is currently concentrated in refining and marketing.

Gros concluded that "Besides being a good deal for our stockholders, this acquisition is a further demonstration of Petrobras's confidence in the medium and long-term perspectives of Argentina and is a contribution to the integration process of the commercial and energy sectors in the Southern Cone of Latin America."

According to Jorge Camargo, president of Braspetro, Petrobras' international arm, the international expansion of the company continues with renewed negotiations with Venezuela's state-owned Petroleos de Venezuela SA (PDVSA). Braspetro recently signed a memorandum of understanding covering about Petrobras's proposed participation in upstream operations in Venezuela and PDVSA's in downstream operations in Brazil. Camargo is hopeful that with changes in PDVSA's administration, "the negotiations that were at a stand still may now start again."

Criticism of deal
Some analysts criticized Petrobras's decision to purchase Santa Fe because of the monumental financial woes Argentina is going through. Brazil itself has just been granted a $30 billion bailout loan from the International Monetary Fund.

In recent weeks, Brazil's real has been plummeting against the US dollar. In addition, inflation, which had been dramatically reduced by severe austerity measures under the administration of President Fernando Henrique Cardoso, is making a comeback because so many products are quoted in dollars.

For example, Brazil's oil products prices are tied by a "trigger mechanism" to the changes in international oil prices. This has become an issue in the upcoming Oct. 6 presidential election because candidates, including the government's promarket candidate, Sen. Jose Serra, argue that because Brazil produces 80% of its oil needs, this mechanism should be scrapped (OGJ Online, July 31, 2002).

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