Statoil buys 25 percent stake in major Petrobras oilfield for up to $2.85 billion

European Stock Markets

Norwegian energy firm Statoil ASA (STO) announced Monday that it has agreed with Petróleo Brasileiro S.A. - Petrobras ( PBR ) to acquire a 25% interest in Roncador, a large oil field in the Campos Basin in Brazil.

The transaction nearly triples Statoil's production in Brazil, with attractive break-evens and potential for additional value creation for both parties through the application of Statoil's expertise in improved oil recovery (IOR). The total consideration comprises an initial payment of USD 2.35 billion, plus additional contingent payments of up to USD 550 million.

Roncador was the largest discovery offshore Brazil in the 1990s and is currently the third largest producing field in Petrobras' portfolio with around 10 billion barrels of oil equivalent (boe) in place and an expected remaining recoverable volume of more than 1 billion boe. The ambition is to increase the recovery factor by at least 5 percentage points, bringing the total remaining recoverable volumes to more than 1,500 million boe.

The field has been in production since 1999 with output, during November 2017, of around 240,000 barrels of oil per day plus around 40,000 boe per day of associated gas. The transaction increases 

Statoil's equity production in Brazil by around 175% to around 110,000 boe per day from around 40,000 boe per day. Petrobras retains operatorship and a 75% interest.

In conjunction with the transaction, the two companies are entering into an agreement with the aim of maximising value creation and the longevity of the Roncador field. Statoil will leverage its IOR technology, competence and experience from the Norwegian Continental Shelf (NCS) and elsewhere, and Petrobras its experience as the largest deep-water operator and pre-salt developer in the world. Several specific opportunities for increased recovery and value creation have already been identified.

Petrobras and Statoil are partners in 13 areas in either the exploration or production phase, ten of which are located in Brazil and three abroad. The acquisition will strengthen Statoil as one of the biggest oil producers in Brazil, operating the Peregrino field and block BM-C-33, both in the Campos Basin, and the BM-S-8 block in the Santos Basin.

Statoil has been deploying its IOR expertise across its global portfolio and has achieved an average recovery rate on the NCS well above the worldwide industry average, with the ambition to increase further. Around 3,000 Statoil employees worldwide work on initiatives related to IOR. The projects for IOR collaboration between Statoil and Petrobras will be overseen by representatives from both companies.

Statoil and Petrobras have also agreed that Statoil will have the option to utilise part of the capacity at Petrobras' Cabiúnas natural gas terminal to allow for the future development of BM-C-33, where both companies are partners and which contains the world class Pão de Açúcar discovery.

This marks an important next step in developing Statoil's position in the Brazilian natural gas market which is on the verge of major transformation. Statoil has more than 35 years of experience in building gas value chains, as the second largest natural gas supplier in Europe and an operator of premium shale gas plays in the US onshore with mid- and downstream positions.

Petrobras CEO Pedro Parente has come to meet Statoil CEO Eldar Sætre in Oslo for the signing on 18 December, which follows the Memorandum of Understanding agreed between the two companies in August 2016 and the Heads of Agreement in September 2017.

The effective date for the Roncador transaction is 1 January 2018. Closing is subject to certain conditions, including government approval.