March 19, 2019 / 4:48 PM / a month ago

Brazil's PetroReconcavo in talks for Petrobras onshore fields: sources

RIO DE JANEIRO (Reuters) - Brazilian independent oil company PetroReconcavo has entered direct negotiations with state-run Petroleo Brasileiro SA to purchase a cluster of 34 oilfields in the nation’s northeast, two oil industry sources told Reuters.

FILE PHOTO: A man walks in front of the Brazil's state-run Petrobras oil company headquarters in Rio de Janeiro, Brazil December 5, 2018. REUTERS/Sergio Moraes/File Photo

Petrobras, as the state-owned company is known, entered talks with the unlisted Salvador, Brazil-based company after upstart 3R Petroleum failed to receive financing for its $453 million purchase of the fields, which was announced in late November, said the sources, who requested anonymity because they were not authorized to discuss internal matters.

The sources said the $453 million bid was considered aggressive, and PetroReconcavo will probably offer less for the fields in the state of Rio Grande do Norte, collectively known as Riacho da Forquilha.

Petrobras did not respond to a request for comment, nor did Ricardo Savini, a partner at 3R Petroleum. Marcelo Magalhaes, chief executive of PetroReconcavo, declined to comment.

Petrobras, Brazil’s largest company by market capitalization, is aggressively selling off non-core assets to reduce its hefty debt load and focus on deepwater exploration and production.

While much attention is geared toward items such as its TAG pipeline unit, expected to fetch several billion dollars, the company is also pushing ahead with divesting dozens of shallow-water and onshore oil and gas fields.

Still, such asset disposals often face bumpy paths. In January, Reuters reported that Petrobras walked away from an offer by an EIG Energy Partners-backed firm to purchase two shallow-water oilfields.

The PetroReconcavo talks were first reported by Upstream Online. The trade publication also reported that Petrobras had entered into exclusive talks with Brazilian independent oil firm Petro Rio SA regarding the sale of its Bauna shallow-water oilfield.

In January, Reuters reported that Petro Rio and Australia’s Karoon Energy Ltd were among the firms to bid on the field. Karavan Oil and Gas, a Brazilian upstart with a close working relationship with Schlumberger NV, also bid for the field, according to people with knowledge of the matter.

Petro Rio did not respond to a request for comment.

When Petrobras announced in late November that it had reached a deal with 3R Petroleum to sell Riacho da Forquilha, it aroused suspicions among industry groups and labor unions, who were concerned about the firm’s upstart status and lack of a clear financing structure.

In an internal document from late last year, PetroReconcavo said it planned to bid for multiple Petrobras onshore oilfields, and had already submitted a binding offer for a gas-heavy cluster of fields known as Miranga.

Relatively small Riacho da Forquilha was producing 8,748 barrels per day (bpd) of oil and 332,000 cubic meters per day of gas as of late 2016, according to the latest public figures by Petrobras. Still, it is among the larger production assets currently on the block.

Reporting by Gram Slattery; Additional reporting by Carolina Mandl in Sao Paulo; Editing by David Gregorio

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