Petrobras raises $70b in biggest share offer

SAO PAULO (AP):

Brazil's state-run oil company raised $70 billion in the world's largest share offering, proceeds that will be used to tap some of the largest oil reserves discovered in decades.

Despite concerns about a growing government role in Petroleo Brasileiro SA, or Petrobras, investors showed extremely strong demand in snapping up voting and non-voting shares.

The shares pricing was released late Thursday on the website of Brazil's securities and exchange commission.

The money will be used to develop massive offshore oil reserves that Petrobras has discovered in the past three years - some of the largest finds in decades that could hold more than 50 billion barrels of recoverable oil.

"From Petrobras' perspective, the share offering was successful in so far as there has been a good amount of appetite from private investors," said Christopher Garman, the Eurasia Group's Latin America director. "The more important objective of the share offering is to raise capital to give Petrobras the conditions to be able to deliver on their ambitious investment targets."

Petrobras shares ended 3.2 per cent higher on Brazil's Bovespa exchange Thursday in anticipation of the sale. Shares that trade in the United States gained 2.5 per cent.

Exchange

Brazil's government - which already controls 40 per cent of the company and more than 50 per cent of its voting stock - will receive $43 billion in shares in exchange for allowing Petrobras to drill for five billion barrels in reserves.

Petrobras' plans call for it to invest $224 billion over five years to develop offshore oil fields in the so-called "pre-salt" region. Analysts have said it will still need to raise more than $50 billion through additional stock offerings or loans to meet its goals.

Most of the pre-salt fields lie at least 115 miles (185 kilometres) off the southeast coast of Brazil, more than a mile below the ocean's surface and under another 2.5 miles (4 kilometres) of earth and salt.

Estimates of the entire area's recoverable oil range between 50 billion and 100 billion barrels, though most officials think it is on the lower end of that spectrum.

Brazilian President Luiz Inacio Lula da Silva hailed the finds as the nation's future, a second declaration of independence, and an economic saviour for 57 million Brazilians living in poverty - 30 per cent of the population. The military wants new submarines and jets to protect the crude. Leftist groups want it all nationalised.