Brazilian deepwater field’s sale process winds down with payment of nearly $2 billion

Brazilian deepwater field’s sale process winds down with total payment of nearly $2 billion

Brazilian oil and gas company PRIO, formerly known as PetroRio, has paid almost $2 billion in total for the acquisition of Petrobras’ entire stake in a deepwater field off Brazil, which will enable it to take over the operatorship of this field.

FPSO P-50; Credit: Paulo Arthur/Petrobras

Back in September 2021, Petrobras disclosed that it had received binding offers from the consortia PetroRio/Cobra and EIG Global Energies Partners/Enauta/3R Petroleum for the acquisition of the Albacora and Albacora Leste fields, explaining that such offers could exceed $4 billion for both fields.

The following month, the Brazilian state-owned energy giant informed in a statement addressing the media speculation about the top bidders that it had not reached a decision about the winning proposal for either asset, but this changed in April 2022 when a contract was signed with PRIO for the sale of the Albacora East field.  

Come September 2022, Petrobras revealed that it had ended the divestment process for the sale of the Albacora concession, as “it was not possible to converge on conditions that would reflect the valuation of the asset for Petrobras.”

At the time, the firm underlined that the divestment of the Albacora East field, from which hydrocarbons are produced via the P-50 floating production, storage and offloading (FPSO) vessel, would not be affected. 

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In an update on Thursday, PRIO reported that the payment regarding the acquisition of Petrobras’ 90 per cent interest and operation of the Albacora Leste field had been made. The company highlighted that the fixed price of the acquisition totalled $1.95 billion, of which $293 million was paid upon the signing of the agreement on 28 April 2022, and the remainder was paid on 26 January 2023, corrected by applicable price adjustments.

In addition, earnout payments totalling up to $250 million can be made, depending on future oil prices, explains PRIO while adding that the National Agency of Petroleum, Natural Gas and Biofuels (ANP) has already been notified of the closing of the deal and formal procedures are expected to be completed by the end of the day.

Upon completion, PRIO will take over the operatorship of this field, “after a meticulous transition programme carried out by a multidisciplinary team made up of the previous operator’s professionals and PRIO employees.” Since the inking of the sale deal, the Brazilian firm explained that 16 working groups had enabled the handover of information and knowledge. During this period, more than 100 PRIO employees embarked on the platform, learning the unit’s operational and safety routines.

Located in the northern area of the Campos Basin, in a water depth of 1,200 metres, at a distance of about 120 km from Cabo de São Tomé, the Albacora Leste field covers an area of 511.56 km2. It is also located 23 km from PRIO’s other field, Frade, where the company has been working on a revitalisation campaign.

PRIO’s reserve certification report from October 2022 –  developed by DeGolyer & MacNaughton (D&M) – estimated economically recoverable 1P reserves of close to 280 million barrels for the Albacora Leste field and net reserves for the company of more than 240 million barrels. The field is expected to be abandoned after 2050 while these estimates consider a long-term price of $62 per barrel of oil.

Discovered in 1986, the Albacora Leste field achieved its first oil in 1998 and currently has a production of approximately 32 kbbld, of which 27,2 kbbld net for PRIO, with 19º API oil and low-sulphur content, produced through its ten production wells and six injection wells currently operating.

In a separate statement, Petrobras confirmed that it had received a cash payment of $1.635 billion (R$ 8.455 billion) in addition to the $292.7 million paid when the sale contract was signed. The firm also expects to receive up to $250 million in contingent payments, depending on future Brent prices.