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September 24, 2010 4:30 PM

Petrobras Stock Offering Raises $67 Billion, Setting New Record

Posted by Julie Triedman

In its first day in the open market, Petroleo Brasiliero SA (Petrobras) managed to set a new record in a public offering, selling $67 billion in new common and preferred stock, the company reported. The company sold more than 4 billion common and preferred shares Thursday.

Roughly $25 billion was sold to private investors; the Brazilian government acquired another $42.5 billion worth in exchange for giving Petrobras the right to develop rich new oil reserves.  By comparison, the Agricultural Bank of China raised $22 billion in its IPO in July.

The offering, scheduled to close on September 29, is being marketed as American Depository Shares on the New York Stock Exchange and as stock on the Sao Paolo Stock Exchange, according to the prospectus filed Thursday with the SEC.

Advising Petrobras, as we previously reported, is longtime outside counsel Cleary Gottlieb Steen & Hamilton. Capital markets partner Nicolas Grabar led the team working on the offering. He was assisted by corporate partner Francesca Odell, who has been spearheading the Brazilian practice,  senior attorney Carla Passos, and associates Dana Stringer and Vivian Lee. All the attorneys are based in New York. 

The company also looked to offshore firm Walkers and Brazil's Machado, Meyer, Sendacz e Opice.

The share sale is an important part of the company's plans to double output over the next decade; it says it will spend $224 billion on offshore exploration and drilling to reach its goal. The share exchange with the government means it is well-placed now to develop recently discovered oil fields off the Brazilian coast, including the Tupi fields, the largest discovery in the Americas in three decades, and the Libra deposit, according to BusinessWeek. Each reserve is reported to contain as amny as 8 billion barrels of oil. Total recoverable reserves off Brazil, meawhile, are estimated at 50 billion barrels, significant but still way behind Saudi Arabia's proven reserves of 267 billion barrels and Canada's 179 billion barrels. 

The underwriters, which include Bank of America/Merrill Lynch, Banco Bradesco BBI, Banco Santander, Citigroup Global Markets, Itau BBA and Morgan Stanley, tapped Stuart Fleischmann, a capital markets partner at Shearman & Sterling, as well as Brazil's Mattos Filho Veiga Filho Marrey Jr. e Quiroga.

The completion of the deal makes room for a new wave of similar offerings in Brazil. And that's good news for the international firms with cross-border capital markets experience, particularly those with a history of work in Brazil.

Those capital-raisings have been on hold for a few months pending Petrobras' pricing of its shares, analysts and investment bankers told Reuters Friday, because companies did not wish to compete with Petrobras for funds. Some ten companies have filed to sell shares in the country, including four in the oil and oil services sector. 

Among oil-related companies now filing for IPOs now are the Brazilian unit of Spain's Repsol YPF SA, another oil company; the Brazilian unit of Australia's Karoon Gas Australia Ltd; Brazil's HRT Participacoes em Petroleo; and the Brazilian unit of Norway's DOF ASA, an oil services company.

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