Brazilian state-run oil company Brazilian state-run oil company Petroleo
Brasileiro SA (PBR, PETR4.BR), or Petrobras, backed out of the bidding for a
stake in Portugal's Galp Energia (GALP.LB), saying Monday that talks with
Italy's Eni SpA (E, ENI.MI) had ended.
Petrobras "has decided to end talks with Eni SpA without completing any
acquisition of a stake in Galp Energia," the company said in a filing with
local stock regulators. An Eni spokesperson also confirmed that the
negotiations had ended.
The decision to end talks closes the books--for now--on what was seen as a
strategic shift for Petrobras, which had pledged to rein in international
investments as the company invests heavily to develop recently discovered
offshore oil fields in
Brazil
.
Petrobras will invest $224 billion through 2014 to develop the pre-salt fields,
where Galp is also a partner. While Petrobras is flush with cash after raising
nearly $70 billion in the world's largest-ever share offer last year, Eni's
supposed asking price of EUR4.7 billion was seen as too rich a price to pay for
Petrobras.
The failure to reach a deal leaves Eni looking for other possible buyers,
although the company is not under pressure to unload the stake, Eni CEO Paolo
Scaroni said.
"Galp Energia has so far been a great investment for Eni," Eni
confirmed Scaroni as saying. "We are in no rush to sell our stake."
Eni is continuing to assess a "series of other opportunities" for its
33.4% stake in Galp, Scaroni said.
"We will (sell it) if and when we receive what we deem a fair offer,"
the Eni chief executive said.
Galp was state-owned until 2000, when it opened to strategic partners and Eni
purchased its stake in the company. In 2005, the Portuguese government sold
another third of Galp to a second investor, Amorim Energia--an energy group
controlled by Portuguese businessman Americo Amorim. Amorim owns 55% of Amorim
Energia, but Angolan state-oil firm Sonangol has a 45% stake in Amorim.
With Petrobras leaving the chase for Galp, eyes are now focused on Sonangol,
which could decide to take a direct stake in the Portuguese company.
Portugal
's
state bank Caixa Geral de Depositos, which owns 1% of Galp, still has a key say
on new investors, and could favor an investment by
Angola
,
which is increasingly important to the country of over 10 million people that
is facing a severe sovereign debt crisis.
In January, Petrobras confirmed that it was evaluating the purchase of Eni's
stake in Galp. Petrobras had been speculated as a possible buyer for the stake
since the expiration of a Galp shareholder agreement in December.
Under a shareholder agreement that runs until 2013, Eni and Amorim Energia's
one-third stakes in Galp were locked until the end of 2010. After that, either
party could sell its stake, but only as a block and with the requirement that
the other party is offered first refusal.
A deal with Petrobras would have further cemented the long history the company
shares with Galp. The two firms participate in exploration consortia to develop
the ultra-deepwater oil fields in
Brazil
,
while Petrobras is also active in exploring deepwater prospects off the coast
of
Portugal
. Last
year, the two companies also formalized a joint venture to produce 250,000 tons
of biodiesel in
Portugal
.
Acquisition of a stake in Galp would have given Petrobras a greater share of
some of the key offshore oil discoveries in
Brazil
's
Santos
Basin
, home
to the pre-salt oil finds. A deal would also have given Petrobras greater
access to the European market, where biofuels consumption is expected to grow
in coming years.
Petrobras also could have used Galp's refining capacity to process increased
crude oil output from fields expected to come onstream over the next decade.
The company's preferred shares traded 0.5% higher at 27.77 Brazilian reais
($16.58) on the Sao Paulo Stock Exchange as of 1440 GMT. Shares of Galp were down 0.9%
at EUR15.02.