The latest move would incredibly add to the oil giant’s plans to boost crude production
After being out of the corruption scandal massacre, oil producer Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) is not just taking adequate cost control measures, but is also aiming to increase production. This is significantly because the corruption scheme not only impacted the state owned company via case filings on its executives, but also shook the Brazilian economy at large.
As per the latest updates by Reuters citing energy regulator ANP, reassessment of a lucrative exploration contract between the company and the Brazilian government will be based on the crude prices as at the end of 2014.
The latest announcement is likely to leave Petrobras with a credit. More so, the revised terms of the contract would enable the company with rights to produce about 5 billion barrels of oil in a massive subsalt area that is under government control. In exchange for carrying out production, the government would be granted with the company shares. All other conditions remain the same as when the agreement was initially signed in 2010 and the crude prices hovered near $100 per barrel. At the end of 2014, Brent crude prices closed at $57.33 per barrel, denting the rights valuation in the Santos Basin south of Rio de Janeiro.
The Brazilian oil giant acquired rights as part of around $70 billion share exchange program. As of now, the agreement requires price revisions of the rights on which the additional resources present in the area would be based on.
In conversation with media persons on Tuesday, Magda Chambriard, general director of ANP stated that the energy prices as at the end of 2014 would just be used as a reference in price negotiations for the contract instead of the actual basis. “All indications are for the company to be a creditor. We only have to check the amount,” she added.
Being the most leveraged energy giant globally, the latest move of crude for shares transfer is likely to help the company’s management that is already carrying out measures to deleverage and raise cash.