Prio buys oil field in Rio de Janeiro for US$1.9 billion (Image: Prio)
A Prio (PRIO3) informed the market, via material fact, that it signed this Friday (27) a purchase and sale agreement with SPEP Energy and Sinochem for the acquisition of the Asian company's 40% stake in Pilgrim's fieldin Rio de Janeiro.
According to the document, the new consortium will be formed by Equinoroperator of the Field with a 60% stake, and by the oil company, with 40%. The acquisition has a value of US$1.9 billion, with US$191.5 million paid at the signing of the contract and a further US$1.72 billion paid at the conclusion of the transaction.
The company and its subsidiaries also had US$632 million in tax losses on December 31, 2023, says the material fact. The conclusion of the deal is subject to the usual precedent conditions for this type of transaction, such as approval by the Administrative Council for Economic Defense (Cade) e waiver or expiration of the term of the acquisition right by Equinor within 30 days.
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Prio asked D&M for a reserves certification report considering a long-term price of US$62 per barrel of oil. As a result, economically recoverable reserves and resources (1P+1C) are estimated to be close to 338 million barrels for the Peregrino Field from January 1, 2024, being, net for Prio, 135 million barrels, with forecast abandonment after 2037.
“After completion of the acquisition, the company's production will increase by approximately 35 thousand barrels per day. Furthermore, Prio sees synergy in the commercialization of oil from the Field, since each Peregrino offtake is approximately 650 thousand barrels and can be combined with cargo from other fields operated by the company to optimize logistics.”
All amounts will be paid using resources already available in Prio's current account, which states that leverage levels will remain within healthy and conservative ranges of up to 1.2 times Net Debt (net debt)/Ebitda (earnings before interest, taxes, depreciation and amortization).
Purchase of PRIO is no surprise
In a report, the BTG says he wouldn't be surprised if the deal goes through. The bank recalls that the company's management has been reinforcing that it will generate value for shareholders through mergers and acquisitions.
Analysts also say that the purchase could be not only positive but also transformative.
“A few weeks ago, we updated our assumptions for the Peregrino field and, even with conservative estimates, we believe that this price would allow IRRs (internal rate of return) denominated in USD were close to 20%”, he highlights.
BTG also does not rule out that this acquisition is just the first step in a broader strategy to eventually buy the entire field. “We expect Equinor to sell its stake in the asset in the coming years.”
“We remain buyers of PRIO, which continues to be our top choice in the sector. The shares are trading at a yield of 18% FCFE in 2025 and 29% in 2026, based on Brent prices of US$75/bbl and US$70/bbl, respectively”, he says.
Already the Goldman Sachs highlights that PRIO management has previously argued that it is able to generate more value by allocating capital at higher rates of return to new projects (seeking IRRs of >20% in USD terms) versus compensating shareholders through dividends.
*With Renan Dantas