Sinopec Clinches Good Price for Galp Brazil Stake

The China National Petrochemical Corp’s is seen obtaining an attractive price after purchasing a 30% stake in the Brazilian operations of Portugal’s Gap for $3.54bn, marking yet another step into Latin America by the company better-known as Sinopec. “Sinopec got a good deal, and it seems less willing to overpay for barrels as it did in the past,” said Thomas Adolff, European oil industry analyst at Credit Suisse. He notes that Galp was also selling its assets under duress, which no doubt helped strengthen Sinopec’s position. Based on Credit Suisse estimates, the enterprise value of the deal is $4.30 per barrel, which is much lower than Sinopec’s acquisition of a 40% stake in Repsol’s Brazilian assets in October 2010 for $5.30 a barrel. The shop also reckons the transaction was valued below Petrobras’ transfer of oil rights which, adjusted for WACC and a special participation tax, stood at $5.80 a barrel. As priced, the deal values the overall Brazilian unit at $12.5bn. The Portuguese company has been seeking to raise as much as EUR2bn ($2.75bn) from the sale of assets and has considered unloading as much as 40% of its business in Brazil. Bank of America Merrill Lynch, UBS, JP Morgan and Caixa advised the Portuguese company. Galp holds stakes in 21 oil projects in seven different Brazilian basins, including the Santos pre-salt basin home to the Lula field, the second largest oil discovery in the Americas.