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By Kanupriya Kapoor and Kari Lundgren
Equinor ASA agreed to sell its 60% stake in the Peregrino oil and gas project off the Brazilian coast to PRIO SA for $3.5 billion, as the Norwegian energy explorer seeks to streamline international operations. Rio de Janeiro-based PRIO gained.
Brazilian firm Prio Tigris Ltda., a subsidiary of PRIO that bought Sinochem Group Co.’s 40% stake in the development last year — will take over operations at the close of the transaction, Equinor said in a statement. Payment will be split into two, the first at signing and the second around when the deal closes.
Shares in PRIO gained as much as 7.7% in morning trading in Sao Paulo on Friday following the announcement. For BTG Pactual analyst Luiz Carvalho, the deal is seen as a “strategic step” for the company to continue expanding its portfolio of mature assets.
“Most of the upside will depend on PRIO’s ability to extract synergies from becoming the asset’s sole operator — but we believe those can be meaningful,” he wrote in a note to clients.
The sale is part of an ongoing effort to “high-grade” Equinor’s international assets divestments and acquisitions, Philippe Mathieu, the company’s executive vice president for international exploration and production, said Friday.
The 110,000 barrel-per-day field east of Rio de Janeiro is Equinor’s largest producing project outside Norway, and consists of a floating production storage and offloading platform. The company remains an operator of the Bacalhau and Raia projects, in the Santos and Campos basins.
Read More: Brazil to Ramp Up Drilling With Arrival of Another Mega Rig
The deal comes after the Norwegian firm made an unsuccessful attempt to sell part of its holding in March, when PRIO, its minority partner in the field, took action to exercise its preferential rights.
The $3.5 billion price tag “screens attractively,” DNB Bank ASA analyst Steffen Evjen said in a note to investors Friday.
Still, “there is a meaningful lag between effective date and closing date,” likely more than 1.5 years, Evjen said. “We expect the final cash payment to be about 20% lower.”
Investors will be looking for proceeds to go toward near-term dividends and share buybacks, he said.
— With assistance from Leda Alvim and Beatriz Reis
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