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The oil company Prio (PRIO3) reached an agreement with Sinochem to purchase the Asian company's 40% stake in the Peregrino field, in Rio de Janeiro, for US$1.9 billion, according to a statement to the market.
According to Prio, the agreement was reached late this Thursday afternoon and the deal should be concluded in the “dawn” of Friday, when a relevant fact about the operation should be published.
Last Wednesday, the company had already confirmed that it was in negotiations to close the deal.
The other 60% of the Peregrino field is owned by the Norwegian oil company Equinor, which is the operator of the field.
According to data provided by ANP (Brazilian oil and gas regulator)production in July from the field was 78 thousand barrels of oil equivalent per day (kboed), or 31 kboed for Sinochem's 40% stake, compared to PRIO's average production of 90 kboed in the second quarter.
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.
The model does not currently consider any reduction in Opex (operating expenses) from the current level of US$450 million per year, largely driven by higher energy costs since the Peregrino platform began using diesel instead of gas for power generation.
“If this issue is resolved, it could unlock more upside in our estimates,” he says.
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 said that while it has no opinion on the likelihood of the potential transaction moving forward, it 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 terms of USD) versus remunerating shareholders through dividends.