New merger in the offing giving birth to one of Latin America’s ‘largest and most diversified’ oil & gas players

Brazilian oil and gas company Enauta has set the wheels into motion to bring into being a larger and more diversified independent oil and gas company in Latin America by proposing a business combination with a compatriot player, 3R Petroleum Óleo e Gás.

FPSO Atlanta is destined to work on Enauta's Atlanta field off the coast of Brazil; Source: Yinson Production

According to Enauta, its board of directors has unanimously approved the submission of a merger proposal to the board of directors and shareholders of 3R Petroleum Óleo e Gás, aiming to establish an independent oil and gas company, which will be “one of the largest and most diversified” in Latin America. The new company is anticipated to hold a strategic positioning in domestic and international capital and banking markets, enabling this business combination to create operational, commercial, and capital allocation synergies.

“The transaction will lead to state-of-the-art governance, with diversified reference shareholders, a predominantly independent board of directors with an experienced executive team. There will be growth opportunities in offshore and onshore operations, mitigating operational, geological and regulatory risks, complementarity in teams, talent attraction and retention and strong adherence to ESG principles,” highlighted Enauta.

The Brazilian player is convinced that the combination with 3R will lead to “a balanced, five-year high organic growth portfolio” with the ability to add value in an environment of consolidation and resilience to commodity pricing cycles. The new company is expected to offer advantages at several levels: operational, commercial, financial, governance, and risk management.

With production exceeding 100,000 barrels of oil equivalent and 2P reserves of over 700 million barrels among a diversified portfolio, Enauta claims that the resulting company will boast “a solid balance sheet, eligibility for investment-grade rating, competitive access to capital, and significant leverage capacity.”

In a bid to optimize the merger transaction with a simplified structure and execution, Enauta has proposed the exchange of shares, eliminating the need for any carve-outs, waiver fees, or restructuring in corporate guarantees. This proposal is subject to due diligence completion during an exclusivity period of up to 30 days.

Moreover, the merger transaction is also subject to customary precedent conditions and any other conditions agreed by the companies, including negotiation of definitive transaction documents; transaction approval by shareholders of both companies at respective extraordinary general meetings; and legal and regulatory approvals, such as the approval from Brazil’s Administrative Council for Economic Defense – CADE.

Enauta is convinced that the merger with 3R presents “a superior transaction compared to that proposed by Maha in a public letter to 3R’s shareholders, in terms of strategic positioning, governance, tangible synergies and from a risk management perspective.

“Results will be promptly and objectively shared across shareholders of both companies, without hindering a future pursuit of operational synergies identified by Maha in optimizations with PetroRecôncavo and with other operators, in a model that minimizes inefficiencies.”

The Brazilian player is busy with portfolio expansion, thanks to a contract with Petrobras to get a hold of oil and gas fields in the Santos Basin and natural gas pipeline infrastructure. In addition, the firm set out to acquire the entire stake held by QatarEnergy Brasil in the oil fields comprising the Parque das Conchas.

Related Article

Aside from new asset acquisitions, Enauta is also divesting a partial stake in two oil fields offshore Brazil. This will enable Westlawn Americas Offshore (WAO), part of Westlawn Group, to open its Latin American oil and gas chapter.