Brazil’s Petrobras has commenced talks to sell its Argentine assets, it said on Wednesday (January 20), but cautioned that there was no guarantee that a deal would be reached.
Local Argentine firms, such as electricity company Pampa Energia and investment group Corporacion America, have emerged as potential buyers of Petrobras’ assets in the country, LatinFinance understands.
Pampa Energia, which completed a follow-on equity offering in November, has looked at Petrobras assets in the past and could now bid for the oil refinery in Bahia Blanca or the Pichi Picun Leufu hydroelectric dam, one M&A source told LatinFinance.
Corporacion America, meanwhile, could look to add to its portfolio after it bought 26 oil and gas fields in the Austral Basin from Petrobras for $101m in March 2015, the source said.
Petrobras’ assets in Argentina include 30 oil reservoirs in Neuquen, more than 100 fuel stations and a stake in natural gas pipeline operator Transportadora Gas del Sur (TGS), along with the oil refinery and hydroelectric dam.
A potential sale of the company’s assets in Argentina would help Petrobras reduce its refinancing needs in 2016, which total about $12bn, Nymia Almeida, a senior corporate analyst at Moody’s told LatinFinance. Moody’s gives Petrobras Argentina a B2 rating with a positive outlook.
Bank of America-Merrill Lynch (BAML) is thought to be advising Pampa Energia on a potential deal, two sources said.
Completing a transaction with Petrobras will not be easy. Market volatility and low oil prices have delayed Petrobras’ planned asset sales, the M&A source said. Last year, the Brazilian state-owned energy company outlined a divestment plan worth about $15bn.
“Over time, in Argentina, the energy sector is expected to normalize and this should pave the way for significant investments,” he said. “Once this is established, it would create a more reasonable time to complete a transaction [with Petrobras].”
Earlier this month, Petrobras cut its 2015-2019 capital spending budget to $98.4bn from $130bn and reduced this year’s investment plans to $20bn from $27bn.
With approximately $6bn due to bondholders this year, Petrobras may also face the possibility of a restructuring in the next 12 or 18 months, an equities source said. While asset sales, particularly in the midstream sector, could ease some of the firm’s refinancing needs, the company cannot survive for too long on its existing strategy, he said.
“At some point, Petrobras will have no choice but to conduct a restructuring exercise either on the debt or equity side,” he said. “Expect to see this hit the headlines in the next 12 months.”
Petrobras did not respond to phone calls or emails from LatinFinance.
YPF opts out
Argentine energy company YPF has reiterated that it will not make another bid for Petrobras Argentina, a source at the company told LatinFinance. YPF dropped its bid for the assets in October 2015, after the pair could not agree on a final price.
Argentina’s energy sector is poised for a strong year in the capital markets, with corporate issuers looking to the bond, equity and loan markets to finance potential acquisitions, a source said. Companies are just waiting for a resolution to the government’s dispute with holdout creditors, he added.
The government has said it will present an offer to bondholders before the end of January. A resolution may signal the end to Argentina’s default and create an opening for the sovereign to tap the international capital markets.