Prio Acquires 40% Stake In Peregrino Oil Field For $1.9 Billion
Date
9/27/2024 3:17:01 AM
(MENAFN- The Rio Times) Prio, a Brazilian oil company, has struck a deal with Sinochem to purchase its 40% stake in the Peregrino oil field.
The agreement, valued at $1.9 billion, marks a significant expansio for Prio in Rio de Janeiro's offshore oil sector.
Prio announced the deal's completion late Thursday, with plans to release a detailed statement early Friday morning.
The Acquisition aligns with Prio's strategy of growth through mergers and acquisitions. BTG analysts view this move as potentially transformative for the company.
They estimate the investment could yield internal rates of return approaching 20% in USD terms, even with conservative projections.
Peregrino's current production stands at 78,000 barrels of oil equivalent per day. Sinochem's 40% share accounts for 31,000 barrels, compared to Prio's average production of 90,000 barrels in the second quarter.
The remaining 60% of the field belongs to Norway's Equinor, which operates the site. BTG analysts suggest this acquisition could be the first step in a broader strategy.
They speculate that Prio might aim to acquire the entire Peregrino field in the future. Equinor may consider selling its stake in the coming years, opening up further opportunities for Prio.
The deal's success hinges on addressing operational challenges. Currently, high energy costs impact the field's profitability.
The Peregrino platform uses diesel instead of gas for power generation, driving up operational expenses to $450 million annually. Resolving this issue could significantly boost the investment's returns.
Prio Acquires 40% Stake in Peregrino Oil Field for $1.9 Billion
Goldman Sachs notes that this acquisition aligns with Prio's previous statements. The company has expressed its preference for investing in high-return projects over paying dividends.
This strategy aims to generate greater long-term value for shareholders. Prio's stock remains a top pick in the sector for BTG.
They project free cash flow yields of 18% in 2025 and 29% in 2026, based on Brent crude prices of $75 and $70 per barrel, respectively. This acquisition reinforces Prio's position as a key player in Brazil's oil industry.
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