Brazil

Brazil:
Upstream Oil & Gas
M&A Investment Opportunities
www.emis.com
Page 1
CONTENTS
Brazil
Country and Economy
3
Upstream Oil & Gas Sector
4
Upstream Oil & Gas Sector M&A Activity
6
Potential M&A Targets
HRT Participações em Petróleo S.A.
8
Petra Energia S.A.
9
PetroRecôncavo S.A.
10
Karoon Petróleo & Gás Ltda.
11
Ouro Preto Óleo e Gás S.A.
12
Barra Energia do Brasil Petróleo e Gás Ltda.
13
Lupatech S.A.
14
Odebrecht Óleo e Gás S.A.
15
BRAZIL
Country and Economy
COUNTRY OVERVIEW
MACROECONOMIC INDICATORS
 Area
 Sovereign credit rating
8,515,767 km2
S&P: BBB- (Stable)
Real GDP Growth
2.7%
Moody's: Baa2 (Negative)
 Population
Fitch: BBB (Stable)
202.8 million (2014)
 Selic official interest rate
 Labour Force
11% (Sep 2014)
107.3 million (2013)
2.3%
1.0%
2011
1.3%
2.0%
2012
2013
2014F
2015F
5.8%
5.9%
6.3%
6.0%
2012
2013
2014F
2015F
5.5%
5.4%
5.1%
5.0%
2012
2013
2014F
2015F
Inflation (CPI)
6.5%
 Average FX rate
 GDP per capita, PPP
USD/BRL 2.15 (2013)
USD 15,034 (2013)
 International reserves
 Official language
USD 379.4bn (Aug 2014)
Portuguese
2011
Unemployment
6.0%
 Corporate tax rate
 Government type
25% (2014)
Federal presidential
constitutional republic
 Market Cap, São Paulo
Stock Exchange
 Administrative division
26 States, 1 Federal District
USD 1,204bn (Aug 2014)
 GDP composition, 2013
Investments
18.0%
Agriculture
5.7%
Government
spending
22.0%
Services
69.3%
2011
Current Account (% of GDP)
-2.1%
-2.4%
-3.7%
-3.4%
-3.1%
2011
2012
2013
2014F
2015F
2.9%
2.9%
2.8%
FDI (% of GDP)
2.7%
2011
Industry
25.0%
Household
consumption
62.6%
Net Exports
-2.5%
2012
2013
2014F
2015F
33.6%
33.3%
32.9%
2013
2014F
2015F
General Government Net Debt (% of GDP)
36.4%
2011
Source: CEIC, CIA, IMF, KPMG, UNCTAD, World Bank
2.7%
35.3%
2012
 Brazil ranks seventh globally in terms
of economic output and is the largest
country in Latin America by both area
and population.
 Brazil is one of the most resource-rich
countries in the world (oil & gas, iron
ore, bauxite, timber) with robust
agricultural sector (corn, sugarcane,
soybeans,
coffee,
citrus,
cattle),
diversified industry and thriving
services sector.
 Local economy is projected to grow at
an average rate of 3.1% for 2015-2019,
boosted by strong consumer demand,
improved business sentiment and
higher government spending in urban
and
social
development,
and
infrastructure. (IMF, Apr 2014)
 Stable
political
and
economic
environment, sound financial system,
favourable external debt composition
and large foreign reserves prevent
significant currency depreciation or
sovereign default.
 Brazil ranks in top five of prospective
FDI host economies for 2014-2016,
according to UNCTAD. Abundant
investment opportunities remain in the
construction,
infrastructure
and
commodities sectors.
 FDI inflows will be driven by the
country’s growing middle class,
increasing disposable income, sector
specific tax incentives, the development
of the promising offshore oil reserves
and the government’s USD 120bn
infrastructure investment programme
in light of hosting the 2014 FIFA World
Cup and the 2016 Summer Olympic
Games.
Upstream Oil & Gas Sector
ECONOMIC IMPORTANCE
2009
2010
2011
2012
2013
H1 2014
Oil & gas extraction (% of real GDP)
1.12
1.04
1.03
1.02
0.99
0.99
FDI equity capital in sector (US D mn)
2,656
9,927
5,976
3,679
7,131
1,008
8.4
18.9
8.6
6.1
14.5
3.6
S ector share in total FDI (%)
Oil exports (mmboe)
202.0
242.6
232.3
211.1
146.3
78.1
Oil exports FOB (US D mn)
9,370
16,293
21,785
20,306
12,957
6,814
Oil & gas imports (mmboe)
Oil & gas imports FOB (US D mn)
196.5
202.8
186.7
195.9
251.3
114.5
10,914
13,252
17,382
18,697
23,425
10,659
PROVED OIL RESERVES (by location and state, Bboe), 2013
14.3
12.9
0.9
15.1
15.3
15.6
0.9
0.9
0.9
2009
14.4
14.7
2010
2011
2012
Offshore
Onshore
2013
13.4
14.1
 Brazil ranked 15th globally in terms of proved oil reserves with 15.6 Bboe (0.92% of
world’s oil reserves) at the end of 2013. (BP)
 The country has approximately 7.5 million km2 of sedimentary areas, spread across
38 major basins, of which 2.5 million km2 are located along the coast. At present,
Rio Grande do
exploration and production concessions are granted for only 4.5% of these areas.
Norte 2.4%
 More than 94% of the country’s oil reserves are located in offshore basins, the largest
Bahia 2.1%
of which are the Campos, Santos and Espírito Santo.

The recently discovered pre-salt fields, rich in light hydrocarbons, are expected to
Others 3.0%
change the country’s reserve profile, which is currently largely composed of heavy
oil, and reduce significantly the imports of foreign light oil and natural gas.
 The pre-salt is a geological formation with an area of over 122,000 km2, located at
water depths of between 5,000-7,000 m under thick layers of rock and salt. Estimates
of Brazilian pre-salt reserves indicate a potential for 50 to 100 Bboe, which could
amount to 3-6% of world’s oil reserves.
Espírito Santo
8.6%
São Paulo 4.3%
0.9
11.9
Rio de Janeiro
79.6%
PROVED GAS RESERVES (by location and state, Bm3), 2013
459.4
459.2
458.2
70.6
72.4
69.8
423.0
367.1
301.6
Amazonas
11.0%
68.8
São Paulo
12.3%
354.2
Espírito Santo
9.5%
Bahia 5.8%
65.5
388.8
386.8
Others 5.3%
388.4
Rio de Janeiro
56.1%
2009
2010
2011
Offshore
2012
Onshore
 The oil & gas sector in Brazil has emerged as one of the country’s driving economic
forces since 1997, when the monopoly of state-controlled Petróleo Brasileiro
(Petrobras) was ended. Following the liberalisation, the sector’s share in Brazil’s GDP
witnessed a four-fold increase to 13% in 2014, of which 1% accounts for extraction.
 Under the concession model adopted in the 1997 Petroleum Law, the regulatory
body ANP held 13 bidding rounds for oil exploration and production rights. As a
result, 39 local and 38 foreign companies entered the market.
 The vast oil reserve discoveries in the offshore pre-salt layer in 2006 have further
increased the growth opportunities in the sector, boosting M&A and foreign
investments to all-time highs.
 After weak investment activity in the last two years, 2013 proved to be a turning
point for the sector due to the resumption of the concession rounds and the first
auctions for development of pre-salt and unconventional gas areas.
2013
Source: ANP, BMI, BP, CEIC, IEA, Oxford Economics
 Brazil ranked 31th globally in terms of proved gas reserves with 458.2 Bm3 (0.24% of
world’s gas reserves) at the end of 2013. (BP)
 Approximately 85% of the country’s gas reserves are located in offshore basins. The
Campos, Santos and Espírito Santo basins hold the majority of gas reserves but
sizable resources also exist in the interior of the country, mainly in the Amazonas,
Parnaíba, Solimões and Potiguar basins.
 The pre-salt areas are estimated to also contain ample natural gas reserves, which
could increase Brazil's total natural gas reserves by 50%, according to Petrobras.
 Brazil is the world’s 10th largest holder of technically recoverable shale gas resources
with 245 Tcf (3.36% of world’s reserves) as of June 2013 (IEA). The most perspective
shale gas basins are Amazonas, Paraná, Solimões, Parnaíba, Pareci, Recôncavo and
São Francisco.
 Brazil took the first step towards shale gas exploration in November 2013, when
ANP awarded 72 licenses for seven onshore basins with potential shale gas deposits.
Upstream Oil & Gas Sector (cont'd)
OIL PRODUCTION (by volume and concessionaire, mmbbl/d)
2.02
0.19
2.13
2.18
2.13
2.10
0.19
0.19
0.19
0.18
85.1%
3.0%
2.3%
2.0%
1.3%
1.3%
2.05
1.83
1.94
1.99
1.95
1.91
2009
2010
2011
2012
2013 H1 2014
Offshore
 Brazil was the 13th largest oil producer in the world in 2013, with a 2.7% share of
global output. (BP)
 More than 92% of the country’s oil production is offshore in deep waters and
consists of mostly medium and heavy grade oil. The Campos and Santos basins
account for over 90% of the current oil output and contain the five largest active
fields (Roncador, Marlim Sul, Marlim, Jubarte and Lula), which produce between
100,000 and 300,000 bbl/d.
 In June 2014, the pre-salt production hit a record high of 478,000 bbl/d, accounting
for 20.6% of the country’s total oil output.
 In the period 2000-2011, Brazil witnessed a continuous increase in oil production at
an average rate of 5%, transforming the country into a net exporter of crude oil.
Since 2012, the oil production has been slowing, affected by falling output at
maturing fields and delays in the development of certain pre-salt fields. However,
with a number of offshore fields scheduled to come online by the end of 2014, oil
production is expected to pick up over the next few years.
2.28
0.23
Onshore
* June 2014
GAS PRODUCTION (by volume and concessionaire,
Mm3/d)
 Brazil ranked 29th globally in terms of natural gas production in 2013, with a 0.6%
share of global output. (BP)
 Approximately 73% of the country’s gas production comes from offshore fields,
such as Mexilhão, Lula, Manati and Marlim Sul, which produce 5-7 Mm3/d. The
largest onshore fields Leste do Urucu, Gavião Real and Rio Urucu are located in the
Solimões and Parnaíba basins, and produce around 5-6 Mm3/d.
 In June 2014, the pre-salt production set a new record of 16.7 Mm3/d, accounting for
19.3% of total natural gas output.
 Since 2000, Brazil’s natural gas production has been growing at an average rate of
5.7%. However, the country remains a net importer of natural gas, primarily from
Bolivia, Qatar, Trinidad and Tobago, and the United States.
 Petrobras is the dominant player in the sector, accounting for over 80% of Brazil’s oil
& gas output. International oil majors such as BG, Shell, Statoil, Repsol and Sinopec
also hold significant positions in the extraction of oil, while domestic companies like
OGPar, Eneva, Queiroz Galvão, BPMP Parnaíba are active in the natural gas market.
84.9
77.2
57.9
16.6
62.8
16.5
65.9
16.9
70.6
16.7
20.6
24.2
81.3%
41.4
46.3
49.1
53.8
56.6
4.4%
3.2%
60.7
BPMB Parnaíba
2009
2010
2011
Offshore
2012
2013
Onshore
3.1%
H1 2014
1.9%
1.1%
* June 2014
FORECASTED MAIN INDICATORS
2014F
2015F
2016F
2017F
2018F
2019F
Oil & gas extraction (% of real GDP)
0.99
0.97
0.96
0.95
0.93
0.91
Oil & liquids production (mmbbl/d)
2.54
2.66
2.79
2.97
3.20
3.40
Oil & liquids production (% change y-o-y)
Dry natural gas production (Bm3 )
Dry natural gas production (% change y-o-y)
7.5
4.8
4.8
6.6
7.6
6.5
18.7
19.4
20.6
22.2
24.2
26.4
4.0
4.0
6.0
8.0
9.0
9.0
Oil & liquids net exports (mmbbl/d)
0.39
0.44
0.50
0.62
0.73
0.81
Dry natural gas net exports (Bm3 )
-15.7
-16.5
-16.9
-17.0
-16.7
-16.4
Source: ANP, BNDES, BP, BMI, CEIC, EY, IEA, Oxford Economics
 Brazil’s oil & gas sector will drive the country’s growth in the coming years as the
main target for FDI projects, mainly for the development of the pre-salt area. (EY)
 The sector is expected to receive USD 210bn in investments by 2017, of which 40%
are likely to come from foreign capital. (BNDES) Petrobras alone will spend USD
147.5bn in exploration and production activities over the next five years.
 The demand for services and equipment in the oil & gas sector should reach USD
400bn by 2020, boosting production in the oil-related industries. (ANP)
 The pre-salt area is expected to place Brazil among the top ten countries with largest
oil & gas reserves, nearly doubling current levels by year 2022. (ANP)
 Brazil’s oil output is projected to increase to 4.4 mmbbl/d by 2020, reaching as high
as 6.5 mmbbl/d in 2035, when the country is expected to be the world's 6th largest
producer. Natural gas production is likely to grow more than five times, enough to
cover the domestic demand by 2030. (IEA)
Upstream Oil & Gas Sector M&A Activity
NUMBER AND VALUE OF DEALS (2013
- Q2 2014)
REGION OF INVESTORS
TOP
5 LEGAL ADVISERS
Adviser
10
3,000
9
EMEA
21.6%
8
8
2,400
Asia
5.4%
6
6
1,800
2,305
5
4
4
786
650
3
520
South
America
5.4%
1,200
North
America
18.9%
1,068
2
600
0
Brazil
48.6%
0
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Number of deals (left hand scale)
1. Oct-13
2. Jan-14
3. Oct-13
- Q2 2014)
Deal Value
Target
Deal Type
Buyer
Seller
Block BC-10
Minority stake
Oil and Natural Gas Corp
Petróleo Brasileiro SA -
1,636.0
in Campos Basin
purchase (35%)
(India); Shell (Netherlands)
Petrobras (Brazil)
(Official data)
Block BC-10
Minority stake
Royal Dutch Shell Plc
1,000.0
in Campos Basin
purchase (23%)
(Netherlands)
(Official data)
OAS Óleo e Gás SA
4. Feb-13 Sete Brasil Participações SA
5. Apr-13 OSX Brasil SA
Source: EMIS Professional DealWatch
Qatar Petroleum Co (Qatar)
Minority stake
FI-FGTS, Caixa Econômica
purchase (39%)
Federal (Brazil)
Minority stake
FI-FGTS, Caixa Econômica
purchase (7.7%)
Federal (Brazil)
Minority stake
Eike Batista - private
purchase (0.96%)
investor (Brazil)
3,475.3
5
2= Ve irano Advogados
1,636.0
1
2= Norton Rose Fulbright
1,636.0
1
3= Bake r Botts
1,000.0
2
3= De mare st Advogados
1,000.0
1
3= NautaDutilh
1,000.0
1
4. Machado Me ye r Adv.
792.2
6
5. Mattos Filho Advogados
530.8
7
5 FINANCIAL ADVISERS
Adviser
n.a.
n.a.
n.a.
(USD mn)
367.5
(Official data)
331.8
(Official data)
252.7
(Official data)
Value ($mn) Deals
1,064.7
7
2. Banco Itaú BBA
547.4
3
3. Cre dit Suisse
497.2
2
4. Lake shore Partne rs
331.8
1
5. Banco Brade sco BBI
202.4
2
1. BTG Pactual
Q2 2014
Total value of deals ($mn, right hand scale)
TOP 5 LARGEST M&A DEALS (2013
Date
Q1 2014
1. Souza, Ce scon Adv.
TOP
113
Value ($mn) Deals
 Deal Status: Announced or Completed
 Market: M&A only
 Industry (NAICS): Oil and Gas Extraction
(211), Support Activities for Oil and Gas
Operations (213112), Oil and Gas Field
Machinery and Equipment Manufacturing
(333132)
 Excluded Deals: restructurings, joint
ventures, IPOs, SPOs, privatisations, buybacks of shares and debt-to-equity swaps
 Deal Value: USD 1 million and above.
When not clearly indicated, it is assumed
that the reported deal value does not
include debt.
 Announcement Date:
01 January 2013 - 30 June 2014
Upstream Oil & Gas Sector M&A Activity (cont'd)
TOP 10 LARGEST M&A DEALS (2009
Date
Target Company
1.
Oct-10
2.
Nov-11 Pe trogal Brasil SA
3.
4.
5.
Mar-10
De von Ene rgy's asse ts
in Brazil
7.
Oct-11
8.
Jan-14
May-11
10= Apr-11
10= May-10
Buyer
Minority stake
China Pe troche mical Corp -
purchase (40%)
Minority stake
Sinope c Group (China)
China Pe troche mical Corp -
purchase (30%)
Sinope c Group (China)
Acquisition (100%)
Acquisition (100%)
(USD mn)
7,111.0
n.a.
(Official data)
4,797.5
n.a.
(Official data)
3,600.0
De von Ene rgy Corp
BP Plc (Unite d Kingdom)
(Unite d State s)
AP Molle r-Mae rsk AS
(De nmark)
Oil and Natural Gas (India);
Block BC-10 in
Minority stake
Campos Basin
21 blocks in
purchase (35%)
Minority stake
Solimõe s Basin
Block BC-10 in
purchase (45%)
Minority stake
Campos Basin
21 blocks in
purchase (23%)
Minority stake
Solimõe s Basin
Barra Ene rgia do Brasil
purchase (45%)
Minority stake
Pe tróle o SA (Brazil)
Rive rstone Holdings LLC
Pe tróle o e Gás Ltda
Barra Ene rgia do Brasil
purchase (n.a.)
Minority stake
(Unite d State s)
First Re se rve Corp
Pe tróle o e Gás Ltda
purchase (n.a.)
(Unite d State s)
OIL & GAS LICENSING ROUNDS (1999
Deal Value
Seller
Sinoche m Group (China)
purchase (40%)
De c-10 SK do Brasil Ltda
Oct-13
Deal Type
Minority stake
May-10 Pe re grino oil fie ld
6.
9.
Re psol Brasil SA
- Q2 2014)
She ll (Ne the rlands)
TNK-BP (Russia)
Qatar Pe trole um Co (Qatar)
HRT Participaçõe s e m
Statoil ASA (Norway)
SK Ene rgy Co Ltd (Kore a)
(Official data)
3,070.0
(Official data)
2,400.0
Pe tróle o Brasile iro SA -
(Official data)
1,636.0
Pe trobras (Brazil)
HRT Participaçõe s e m
(Official data)
1,000.0
Pe tróle o SA (Brazil)
Royal Dutch She ll Plc
(Official data)
1,000.0
(Ne the rlands)
(Official data)
708.3
Pe tra Ene rgia SA (Brazil)
n.a.
(Official data)
500.0
(Official data)
500.0
n.a.
(Official data)
- 2013)
st
Round
Year
Offered
area (km²)
Number
of blocks
Signature
bonus
(USD mn)
Awarded
companies
1 pre-
1
2
3
4
5
6
7
8
9
10
11
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2013
2013
2013
54,660
48,074
48,629
25,289
21,951
39,657
194,651
-
45,614
48,030
100,372
1,548
47,428
675,902
12
21
34
21
101
154
251
-
117
54
142
1
72
980
180.9
261.7
240.8
33.9
9.2
222.1
484.1
-
1,140.7
37.9
1,407.6
6,924.9
165.2
11,108.8
11
16
22
14
6
19
30
-
36
17
30
5
12
-
Source: ANP, EMIS Professional DealWatch
salt
12
Total
 Since 2009, Chinese state-owned companies
have been the most active buyers in the
Brazilian oil & gas sector, in line with
China’s “going-out” investment strategy to
secure access to overseas raw materials and
energy resources.
 In May 2010, Sinochem, the biggest Chinese
supplier of chemical products, secured a 40%
stake in the Peregrino offshore oil field with
estimated recoverable reserves between 300
and 600 mmbbl for USD 3.1bn. At the time,
this was the largest asset transaction during
the past five years.
 Sinopec Group, Asia's biggest oil refiner,
invested USD 11.9bn in the Brazilian
subsidiaries of Iberian energy groups Repsol
and Galp Energia to boost the development
of their oil-rich offshore assets. Presently,
Repsol-Sinopec and Petrogal rank among the
top 10 largest oil & gas producers in Brazil.
 The largest PE deal in the sector was the
acquisition of a majority stake in Brazilian oil
& gas start-up Barra Energia by U.S. private
equity firms Riverstone Holdings and First
Reserve for a combined amount of USD 1bn.
Another major transaction was the USD
400mn investment by Singapore's sovereign
wealth fund Temasek in Odebrecht Óleo e
Gás, the oil & gas arm of Brazilian industrial
conglomerate Odebrecht, in late 2010.
 In May 2013, Brazil saw all-time high upfront
signature bonuses in its first auction for
exploration concessions in five years. A
record number of 30 companies from 12
countries paid USD 1.4bn and committed
USD 3.4bn in minimum exploration activities
for 142 blocks.
 In Oct 2013, Brazil held its first auction for
pre-salt oil licenses under a productionsharing regime. A consortium of Petrobras
(40%), Total (20%), Shell (20%), CNPC (10%)
and CNOOC (10%) paid USD 6.9bn to
develop the Libra block. The area has
estimated recoverable resources of 8 to 12
Bboe of oil and 120 Bm3 of natural gas. It will
require an investment of USD 184bn over the
35-year concession period. (ANP)
HRT Participações em Petróleo S.A.
4,980
% ma rgin
Balance Sheet
(cons)
Total Assets
-
-
2012
2013
2,079,370
768,742
4.1%
Half-year,
Jun-2014
876,378
PP&E
192,409
59,243
65,215
Current Assets
480,181
286,690
297,966
18,372
14,300
158,633
291,691
149,330
208,932
1,580
29,970
0
of whic h Cash
Total Liabilities
of whic h Debt
SHAREHOLDERS AND STOCK*
 HRT seeks investment and operating partners to turn
its exploration assets in Solimões and Namibia into
producing ones through a farm-out. The company also
considers raising additional funds through a share
offering or private placement to extend the lifetime of
its sole operating field Polvo (est. USD 60mn) and to
acquire other oil & gas producing assets in Campos
basin. (Milton Franke, CEO, Sep 2014)
 The acquisition of the active Polvo field in early 2014
marked a turning point for HRT and led to positive
cash flow generation for the first time in its history.
 A debt-free company, with high-potential portfolio of
undeveloped traditional and unconventional gas
assets.
 HRT has an ongoing USD 120mn programme to sell
non-core assets, including its G&G services unit IPEX.
 The company has significant G&G and support
services capabilities, and a qualified management team
with 106 years of combined experience.
RECENT TRANSACTION ACTIVITY
* August 2014
Da te
JG Petrochem
19.2%
Au g - 14
Aventti
Strategic
Partners 6.4%
Free Float
68.7%
Morgan Stanley
5.7%
52wk Range: BRL 6.3 -16.0 1-Yr Rtn: -18.6%
Mcap, Aug 2014: USD 185.2mn, P/E, (ttm): neg
S ta ke
6 .4 1%
De a l
Va lu e
$ 10 .1 mn
Ta rg e t
B u ye r
S e lle r
HRT
Ave n tti
S tra te g ic
P a rtn e rs
P riva te
In ve s to rs
HRT
AP Mo lle rMa e rs k
J u l- 14
4 0 .0 0 %
n .a . P o lvo o il fie ld
Ap r- 14
17 .5 5 %
$ 2 1.7 mn
HRT
Mo rg a n
S ta n le y, P riv.
In ve s to rs
Dis c o ve ry
Ca p ita l
Ma n a g e me n t
J a n - 14
19 .2 5 % $ 2 7 .4 mn
HRT
J G P e tro c h e m
P a rtic ip a ç õ e s
P riva te
In ve s to rs
16
J a n - 14
5 .11%
$ 5 .0 mn
HRT
Ita ú Un ib a n c o
Ho ld in g
P riva te
In ve s to rs
De c - 13
6 .3 0 %
$ 6 .1 mn
HRT
Dis c o ve ry
Ca p ita l
Ma n a g e me n t
P riva te
In ve s to rs
No v- 13
19 b lo c ks in
6 .0 0 % $ 9 6 .0 mn th e S o limõ e s
Ba s in
Ro s n e ft
HRT
No v- 13
1.7 8 %
Dis c o ve ry
Ca p ita l
Ma n a g e me n t
P riva te
In ve s to rs
12
8
Sep-14
Jul-14
4
Aug-14
Note: (1) DeGolyer & MacNaughton, Dec 2013
Source: Company, EMIS Professional
24.9%
Jun-14
 In Aug 2014, Rosneft closed the acquisition of an
additional 6% interest in Solimões for USD 96mn,
valuing the blocks at USD 1.6bn, and agreed to provide
a USD 40mn loan to finance HRT’s investments in the
basin.
-
(142,475) (1,039,491)
Apr-14
 In Jul 2014, HRT agreed to acquire the remaining 40%
stake it did not already own in the Polvo oil field.
30,381
May-14
 In Jul 2014, HRT signed a MOU with Rosneft and
Petrobras for the study of viable alternatives for gas
monetisation in Solimões, for which it seeks strategic
partners (farm-out of a 25% interest).
5888.3%
Mar-14
 In Apr 2014, U.S. hedge fund Discovery Capital sold
most of its shares in HRT, renouncing an alleged hostile
take-over. Brazilian entrepreneur Nelson Tanure (JG
Petrochem) remained HRT’s largest shareholder.
-41.0%
Feb-14
 In Sep 2013, HRT concluded a USD 285mn drilling
programme in Namibia without a commercial
discovery, launching a farm-out process. The company
posted total impairment losses of USD 1.1bn in 2013.
-41.8%
(189,191) (1,198,361)
Jan-14
RECENT DEVELOPMENTS
2,041
-
Net profit
 In Namibia, HRT holds interests in 10 offshore blocks in
the Orange and Walvis sub-basins, with net risked
Pmean prospective resources of 2.2 Bboe of oil and 10.3
Tcf of natural gas.(1)
 In Oct 2010, HRT raised USD 1.6bn in its IPO in Brazil
and used the proceeds to acquire 2D and 3D seismic
data, and to drill 14 exploration wells.
3,463
(cumul)
122,251
% ma rgin
Dec-13
 Its exploration portfolio includes a 49% stake in 19
onshore blocks in the gas-rich Solimões basin (Rosneft,
as operator, with 51%), with estimated net 3C resources
of 352 mmboe.(1)
2013
% growth
EBITDA
INVESTMENT RATIONALE
H1 2014
2012
(cons)
Sales
Nov-13
 HRT is the 6th largest oil operator in Brazil, with a 60%
stake in the offshore Polvo field in Campos basin, with
average production of 10,093 bbl/d in June 2014 and
gross proved reserves of 15 mmboe.
Income Statement
Oct-13
 Founded in 2009, HRT engages in the exploration and
production of oil & gas in Brazil and Namibia, and the
provision of geological, geophysical and geochemical
services.
KEY FINANCIALS, USD thousands
Sep-13
OVERVIEW
$ 1.8 mn
HRT
Petra Energia S.A.
OVERVIEW
 Founded in 2005, Petra is a pre-operational oil & gas
company focused on exploration and development of
onshore sedimentary basins in Brazil. The company is a
pioneer in the exploration of unconventional shale gas.
 Petra’s portfolio includes a 100% stake in 25 onshore
blocks in the São Francisco and Amazonas basins, a
100% interest in 15 onshore blocks in the Tucano Sul
basin, and a 70% stake in four offshore blocks in the
Pernambuco-Paraíba basin. In Africa, the company has
interests in 11 onshore blocks in Sudan and Chad.
 Petra has an option to buy back its former 30% interest
in seven gas producing blocks in the Parnaíba basin,
operated by peer Parnaíba Gás Natural (70% stake).
 The company also controls 30% of three gas thermal
power plants with installed capacity of 908 MW,
fuelled by gas produced in the Gavião Real field in
Parnaíba. The latter are part of the 3,722 MW gas
thermoelectric power generation complex Parnaíba,
developed by Brazilian energy group Eneva.
RECENT DEVELOPMENTS
 Gas production at the Gavião Real field in Parnaíba
started in Jan 2013 and reached an average of 6 Mm3/d
in Q1 2014. The overall production in 2013 was 1.4 Bm3.
 In Jul 2013, Petra confirmed the discoveries of
unconventional gas in 21 wells in the São Francisco
basin, and launched an evaluation of their commercial
viability, as part of its USD 450mn investment
programme for the basin by 2015.
 In Nov 2013, Petra won interests in seven onshore
blocks, covering an area of 20,000 km2 in the Paraná
basin, with potential shale gas deposits.
 In Dec 2013, Petra transferred its 30% interest in seven
onshore blocks in Parnaíba to Brazilian bank BTG
Pactual in exchange for the settlement of debts worth
USD 189mn, with a buy-back option in one year.
 In Apr 2014, Petra started the exploration programme
in Tucano Sul basin with 2D seismic data acquisition.
 In Jul 2014, the oil & gas arm of Brazilian construction
group Cowan reportedly made a bid to acquire certain
assets or an equity stake in Petra.
Source: Company, EMIS Professional
KEY FINANCIALS, USD thousands
Income Statement
(cons)
Sales
INVESTMENT RATIONALE
2010
2011
2012
-
-
-
% growth
-
-
-
EBITDA
(43,012)
695,862
(182,693)
% ma rgin
-
-
-
Net profit
(42,975)
432,225
(186,022)
-
-
-
2010
2011
2012
64,036
864,533
1,068,309
% ma rgin
Balance Sheet
(cons)
Total Assets
PP&E
Current Assets
of whic h Cash
Total Liabilities
of whic h Debt
385
5,291
183,921
40,416
485,934
61,316
33,403
174,413
24,005
50,257
446,254
582,768
0
185,339
318,165
SHAREHOLDERS AND MANAGERS
 Petra is controlled by Brazilian diversified
mining and oil & gas group STR Projetos e
Participações (99.6%) and Canadian
banker Vincent Parkin (0.4%).
 STR’s shareholders are Brazilian energy
consultant and former politician Roberto
Viana Batista Junior (60%), Chinese
diplomat and oil & gas expert Philip Yang
(10%) and executive partners (30%).
 Petra’s management team has a strong
financial,
political
and
technical
background. It is led by CEO Winston
Fritsch (former Secretary of Economic
Policy in the Ministry of Finance, and exmanager of Dresdner Bank, Lehman
Brothers and Rio Bravo Investimentos),
Bruno Guedes (ex-Managing Director at
Citibank and Bank of Boston), Marcelo
Fonseca (energy consultant and financier),
and Pedro Mercadante Oliva (economist
and energy consultant).
 Petra is allegedly seeking external funding to buy back
its 30% interest in the gas producing blocks in Parnaíba,
which would lead to improved operating results and
positive cash flow generation.
 The company is also looking for strategic partners or
PE funding to develop its high-potential exploration
portfolio, with the prospect of becoming the first shale
gas producer in Brazil. (Sep 2013) A private share
placement or an IPO over the next five years are also
considered. (Winston Fritsch, CEO, Nov 2012)
 Low indebtedness (LTD/Equity ratio of 0.28 as of Dec
2012) and large accounts receivable balance of USD
687.6mn by Dec 2012, formed from the sale of non-core
assets, covered with bank guarantees.
 Successful vertically integrated strategy, based on longterm gas supply contracts with the Parnaíba complex,
along with growing domestic demand for natural gas.
 A niche player with significant capabilities for
hydraulic fracturing.
RECENT TRANSACTION ACTIVITY
Da te
De a l
Va lu e
Ta rg e t
B u ye r
S e lle r
$ 2 .2 mn
7 b lo c ks in th e
P a ra ná b a s in
P e tra En e rg ia
Go ve rn me n t
o f Bra zil
S e p - 13
3 0 .0 % $ 18 8 .8 mn
7 b lo c ks in th e
P a rn a íb a
b a s in
BTG P a c tu a l
P e tra En e rg ia
Ma y- 13
10 0 .0 % $ 2 4 .4 mn
P e tra En e rg ia
Go ve rn me n t
o f Bra zil
P e tra En e rg ia
Go ve rn me n t
o f Bra zil
No v- 13
S ta ke
n .a .
15 b lo c ks in
th e Tu c a n o
S u l b a s in
4 b lo c ks in th e
$ 1.3 mn P e rn a mb u c o P a ra íb a b a s in
Ma y- 13
7 0 .0 %
No v- 12
3 0 .0 %
$ 7 .4 mn
MC2 No va
Ve n e c ia TP P
P e tra En e rg ia
Be rtin En e rg ia ,
S ta r En e rg y
S e p - 12
10 0 .0 %
$ 2 1.6 mn
7 b lo c ks in
Ch a d
P e tra En e rg ia
Go ve rn me n t
o f Ch a d
J u l- 12
10 0 .0 %
n .a .
4 b lo c ks in
S uda n
P e tra En e rg ia
Go ve rn me n t
of S uda n
PetroRecôncavo S.A.
OVERVIEW
KEY FINANCIALS, USD thousands
INVESTMENT RATIONALE
 Founded in 1999, PetroRecôncavo specialises in the
development and recovery of mature and marginal oil
& gas fields in onshore basins in Brazil.
Income Statement
 PetroRecôncavo operates 12 blocks in the Recôncavo
basin, based on a long-term incremental production
agreement with Petrobras until 2025, and owns and
operates another five mature blocks in the basin.
% growth
69.3%
11.8%
3.9%
EBITDA
68,677
84,460
89,191
% ma rgin
57.3%
63.0%
64.0%
Net profit
47,314
57,420
57,279
% ma rgin
Balance Sheet
39.5%
42.8%
41.1%
2011
2012
2013
152,567
179,093
194,568
115,403
146,305
157,258
32,803
29,703
34,154
2,788
5,566
1,086
36,798
40,938
40,432
0
0
0
 The company receives a fixed payment from Petrobras
for the delivery of all oil & gas produced at the blocks,
as well as a 15% share of the incremental product, paid
in cash at market prices.
 Since 2000, PetroRecôncavo has increased by 340% the
net proved reserves in Petrobras’ 12 blocks through
primary, secondary and tertiary recovery projects.
 The company has 27 mmboe of 3P net reserves, of
which 82% proved and 86.4% corresponding to oil; 60.3
mmboe of 3C net contingent resources, and 12.2
mmboe of net prospective resources.(1)
RECENT DEVELOPMENTS
 In May 2011, PetroRecôncavo and its majority
shareholder PetroSantander filed a request to sell
shares through an initial public offering and a
secondary share offering on BM&Fbovespa but
economic uncertainty delayed the sale.
 In Dec 2012, the company announced intentions to
expand in other Latin American and West African
countries through acquisitions of exploration and
production assets, partnering with sector peers.
 PetroRecôncavo invested USD 50mn to drill 13 wells
during 2012, part of its USD 350mn investment plan to
increase output to 7,900 boe/d by 2015.
 In 2013, the company’s total oil output (own and
Petrobras blocks) averaged 6,200 bbl/d, compared to
5,100 bbl/d in 2012 and 4,100 bbl/d in 2011.
(cons)
Sales
(cons)
Total Assets
PP&E
2011
2012
2013
119,922
134,097
139,326
Current Assets
of whic h Cash
Total Liabilities
of whic h Debt
 A niche player, with proven track record of increasing
production levels in mature onshore fields, which are
often economically unviable for larger oil producers.
 PetroRecôncavo has substantial volumes of 3P certified
reserves, mostly light crude oil (API gravity of 37°),
which is less common in Brazil and primarily imported
at higher prices from Africa and the Middle East.
 High growth potential - proved undeveloped resources
of 12 mmbbl oil and 2.8 MMcf natural gas (Dec 2013).
 A debt-free company, with high gross margins, strong
profitability (ROE of 34.1% in FY 2013) and solid topline growth (4-year CAGR of 24.4%).
 Tax incentives to reduce 75% of income taxes by 2019,
and mandatory dividends at 25% of net income.
SHAREHOLDERS*
MANAGEMENT BOARD
 PetroRecôncavo is controlled by U.S. oil &
gas
company
PetroSantander
Inc,
specialised in operating mature onshore
basins in the U.S.A., Colombia and
Romania, by Brazilian drilling & well
services provider Perbras - Empresa
Brasileira de Perfurações, and by
Opportunity Holding FIP, the private
equity arm of Brazilian investment bank
Banco Opportunity SA.
The company has an experienced management team with
strong financial and technical background, and over 70
years of combined industry experience:
Perbras
24.7%
Opportunity
Holding FIP
24.7%
Managers &
employees 1.2%
 In H1 2014, PetroRecôncavo produced from its own
blocks on average 162 bbl/d of oil and 833 m3/d of
natural gas, a 20% increase y/y.(2)
Note: (1) Netherland, Sewell & Associates (NSAI), Dec 2010
(2) ANP
Source: Company, EMIS Professional
 PetroRecôncavo seeks funding (PE, farm-outs, private
share placement or an IPO) for its expansion plans.
PetroSantander and Opportunity Holding are
considering to reduce or completely sell their interest.
PetroSantander
49.4%
* December 2013
 Marcelo Magalhães, CEO, financier and manager with
30 years of experience, former executive at IBM,
associate at McKinsey, and vice-president of Brazilian
Association of Independent Producers of Oil & Natural
Gas.
 Rafael Procaci da Cunha, CFO, financier with MBA
from Darden Business School, University of Virginia.
 Gabriel Enrique Archila Olarte, COO, engineer with 20
years of experience in the oil & gas industry.
Karoon Petróleo & Gás Ltda.
OVERVIEW
 Founded in 2008 as a wholly-owned subsidiary of
Australian mid-sized explorer Karoon Gas Australia
Ltd, Karoon is a pre-operational oil & gas company,
focused on developing offshore blocks in Brazil.
 The company holds a 65% interest and is the operator
of five offshore blocks in the Santos basin, with a total
area of 549 km2 and average water depths of 400 m.
 Karoon has a 20% stake in a 50 km2 offshore block
within the Bauna Sul (Marujá) light oil discovery in the
Santos basin, partnering with Petrobras (80%).
 The company has completed a three-well exploration
drilling campaign in the Santos basin, reporting oil
discoveries in the Kangaroo-1 and Bilby-1 wells.
 The Kangaroo-1 discovery has estimated gross 3C
contingent resources of 487 mmbbl of light crude oil
(API gravity of 40°). The Bilby-1 well discovered a
proven 320 metre oil column with API gravity of 28°.
 Estimated net un-risked P50 prospective resources of
330 mmbbl.(1)
RECENT DEVELOPMENTS
 In Oct 2010, Karoon filed for an IPO to sell 31.9% of its
Brazilian and Peruvian operations for around USD
773mn, aiming to raise funds for its exploration
programme. The offering was consequently postponed
due to economic uncertainty.
 In Dec 2012, Citigroup ranked Karoon among the 19
potential Australian takeover targets for 2013, naming
BG Group, Petrobras and Sinopec as possible buyers.
 In Aug 2013, Macquarie Group estimated Karoon could
get up to USD 250mn for 15% of its Brazilian
operations, valuing the whole company at USD 1.7bn.
 In Dec 2013, Brazilian regulator ANP approved
Karoon’s discovery appraisal plan. The company
committed to drill two firm and four optional wells to
assess the Kangaroo discovery, with first production
estimated by 2018. The development of the other
discoveries remains subject to further assessment.
 In Mar 2014, Karoon sold a 35% stake in its five blocks
in the Santos basin to Canadian peer Pacific Rubiales,
maintaining efforts to farm out an additional interest.
Note: (1) Certified by Lino Barro, Karoon’s Engineering Manager, Apr 2014.
Source: Company, EMIS Professional
KEY FINANCIALS, USD thousands
Income Statement
(carve-out)
Sales
Jun-12
Jun-13
4,549
4,268
INVESTMENT RATIONALE
Half-Year,
Dec-2013
2,084
% growth
-
-6.2%
8.7%
EBITDA
(416)
(1,998)
(1,870)
% ma rgin
-
-
-
Net profit
(695)
(2,275)
(1,711)
-
-
Jun-12
Jun-13
Half-Year,
122,289
405,903
% ma rgin
Balance Sheet
(carve-out)
Total Assets
PP&E
Current Assets
of whic h Cash
Total Liabilities
of whic h Debt
Dec-2013
151,696
38
167
162
13,487
354,950*
81,003
1,172
98,709
52,194
3,987
283,681
36,259
0
13,906
0
 Karoon’s Australia-based parent committed to farming
out up to 20% equity interest in its Brazilian subsidiary
to fund its exploration and development campaign
through 2018, valued at USD 3bn. (Aug 2014) The
company does not rule out other funding options in the
medium term - a further stake sale, issue of new shares
or an IPO of the South American assets. (Edward
Munks, COO, Mar 2013)
 High-potential, undeveloped light and medium oil
assets in shallow waters in the Brazilian pre-salt area,
less than 100 km away from significant commercial
discoveries such as Piracuca (550 mmboe), Tiro and
Sidon (120 mmboe) and Guaiama (120 mmboe).
 Can provide fast entry point into Brazil’s oil & gas
sector through early-stage, quality assets in proven
basins, with a potential of large pre-salt discoveries.
 Strong and experienced JV partner of ConocoPhillips,
PetroChina, Petrobras and Pacific Rubiales, with
extensive geological & geophysical capabilities.
* Includes Assets held for sale of USD 244.4mn.
MANAGEMENT BOARD
 Robert Hosking, CEO, with 35 years of
experience in the oil and steel industries,
founder of Karoon and Nexus Energy.
 Mark Smith, Exploration Manager, with
30 years of experience in geology, former
executive at BHP Petroleum.
 Edward Munks, South America Director
and COO, with 31 years of experience at
Anzoil and Discovery Petroleum.
 Brian Jon Luecke, Exploration Manager
South America, with 40 years industry
experience at Phillips Petroleum, IEDC,
ARCO and Anzoil.
 Dennis Hining, Drilling Manager South
America, with 40 years of experience in
deepwater oil & gas exploration, former
executive at ExxonMobil and Shell.
 José Coutinho Barbosa, geologist with 38
industry experience, former CEO of
Petrobras, Braspetro and Lupatech.
RECENT TRANSACTION ACTIVITY
Da te
S ta ke
De a l
Va lu e
n.a .
Ta rg e t
S - M- 1166
bloc k
Ma r- 13
35.0%
S e p- 12
35.0% $40.0 mn
4 bloc ks in the
S a ntos ba s in
Aug- 10
20.0% $29.4 mn
S - M- 1352
bloc k
B u ye r
P a c ific
Rubia le s
Ene rgy Corp
P a c ific
Rubia le s
Ene rgy Corp
Ka roon
S e lle r
Ka roon
Ka roon
P e trole o
Bra s ile iro S A P e trobra s
Ouro Preto óleo e Gás S.A.
OVERVIEW
 Founded in 2010 by former executives of energy major
Petrobras and sector firm OGX, Ouro Preto is an
exploration stage oil & gas company, focused on
acquisition and development of sedimentary basins in
Brazil.
 Its exploration portfolio includes a 100% interest in four
onshore blocks in the Parnaíba basin with a total area
of 12,054 km2 and one offshore block in the
Barreirinhas basin with an area of 192 km2.
 The company also holds interests in seven onshore
blocks, covering 194 km2 in the Recôncavo basin, with
potential shale gas deposits.
 Ouro Preto has a team of 25 geologists, geophysicists
and engineers with extensive experience in state-owned
and privately held oil & gas companies.
 The company is controlled by Angel FIP, an investment
vehicle of Brazilian entrepreneur Rodolfo Landim, and
Julio Bozano, the 34th richest man in Brazil.
RECENT DEVELOPMENTS
 In Nov 2013, Ouro Preto raised equity funding of USD
107mn from local investors Turim and Cia Bozano.
 In Jan 2014, the company launched its exploration
programme with the acquisition of 2,500 km of 2D
seismic data in the Parnaíba basin. A minimum of USD
55mn will be invested over the next five years.
 In Aug 2014, Ouro Preto closed the acquisition of the
Brazilian assets of U.S. oil & gas company EP Energy
for an estimated amount of USD 100mn, becoming the
18th largest oil & gas producer in Brazil. The deal
involves equity interests in ten gas-rich blocks in the
Camamu-Almada, Espírito Santo and Potiguar basins,
with average production of 5,000 boe/d in 2013, and net
proved reserves of 11.6 mmboe as of Dec 2013.(1)
 In Sep 2014, the company started the development
programme of the newly acquired fields in the
Camamu-Almada basin, Pinaúna (estimated reserves of
50 mmboe) and Camarão (adjacent to Manati, one of
the largest gas producing fields in Brazil, average
production of 6 Mm3/d in H1 2014).
Note: (1) 2013 Annual Report of EP Energy Corp.
Source: Company, EMIS Professional
KEY FINANCIALS, USD thousands
Income Statement
(cons)
Sales
INVESTMENT RATIONALE
2011
2012
2013
-
-
-
% growth
-
-
-
EBITDA
(4,435)
(3,798)
(9,404)
% ma rgin
-
-
-
Net profit
(4,142)
(3,956)
(4,900)
-
-
-
2011
2012
2013
7,404
12,734
128,997
% ma rgin
Balance Sheet
(cons)
Total Assets
PP&E
Current Assets
of whic h Cash
Total Liabilities
of whic h Debt
89
75
72
4,829
10,883
108,677
4,805
10,776
106,829
197
170
312
0
0
0
SHAREHOLDERS AND MANAGERS*
* December 2013
Cia Bozano
27.1%
 Ouro Preto seeks strategic partners for the
development of its exploration portfolio and PE
funding for boosting its growth strategy through
participation in new bidding rounds, assets purchases
and farm-ins. (Apr 2014)
 The acquisition of the low risk, fully developed and
cash flow generating assets of EP Energy transformed
Ouro Preto into an independent E&P player with
diversified assets and attractive upside potential.
 Based on a conservative approach, the company has
build a high-potential portfolio of traditional and
unconventional gas assets, adjacent to producing fields
of Petrobras, BP, BG Group, OGPar and Petrogal.
 A debt-free company, with proven track record in
attracting capital from strategic and financial investors.
 Qualified management team with combined experience
of 150 years in the discovery and development of oil &
gas producing formations in Brazil.
RECENT TRANSACTION ACTIVITY
Da te
Apr- 14
Angel FIP 51.5%
Turim 21
Investimentos
14.5%
Nov- 13
Managers 6.9%
S e p- 13
 Rodolfo Landim, President, 32 years
sector experience at Petrobras, Smith
International and Wellstream, co-founder
of OGX, current Director of Cameron
International and energy-focused PE firm
Mare Investimentos (USD 340mn AUM).
 Sergio Possato, Executive Director, 40
years sector experience, former executive
at Petrobras and the Brazilian National
Petroleum Agency (ANP).
 Marcos Leme, Technology Director, 10
years experience at Petrobras, IBM, PGS,
Halliburton and Gaia.
J ul- 13
Ma y- 13
S ta ke
De a l
Va lu e
31.85% $106.7 mn
Ta rg e t
B u ye r
S e lle r
Ouro P re to
Cia Boza no,
Turim 21
Inve s time ntos
n.a .
Ouro P re to
Gove rnme nt
of Bra zil
Ouro P re to
Gove rnme nt
of Bra zil
Ouro P re to
EP Ene rgy
Ouro P re to
Gove rnme nt
of Bra zil
7 bloc ks in the
Re c ônc a vo
ba s in
P N- T- 114 a nd
100.0%
$4.5 mn
P N- T- 137
bloc ks
EP Ene rgy
100.0% $100.0 mn P e s c a da , EP
Ene rgy do Bra s il
P N- T- 165, P N100.0%
$7.4 mn T- 151, BAR- M387 bloc ks
n.a .
$2.2 mn
J a n- 13
0.48%
$21.7 mn
Ouro P re to
Cia Boza no
n.a .
Oc t- 12
14.0%
$9.9 mn
Ouro P re to
Cia Boza no
n.a .
Barra Energia do Brasil Petróleo e Gás Ltda.
OVERVIEW
ASSET PORTFOLIO
INVESTMENT RATIONALE
 Founded in 2010, Barra Energia is an exploration stage
oil & gas company, focused on development of proven
offshore sedimentary basins (Santos, Campos and
Espírito Santo) and emerging pre-salt areas in Brazil.
 The post-salt BS-4 block includes the
ultra-deep fields Atlanta and Oliva, with
2.1 Bboe in place and estimated
recoverable volume of 260 mmboe of
heavy oil (14° API). According to
financial adviser Rothschild, Barra’s stake
could be worth as much as USD 326mn.
 Barra Energia is not ruling out raising additional
investments to fund its growth plan through asset
purchases, farm-ins, participation in bid rounds and
strategic partnerships with oil field operators. (Renato
Bertani, CEO, Apr 2014)
 In the period 2010-2013, Barra Energia received USD
1.2bn in funding commitments from major energyfocused private equity firms and invested some USD
500mn in acquisitions of concession blocks and
exploration programmes.
 In Santos basin, the company has a 30% interest in the
BS-4 block, partnering with OGPar (40%) and Queiroz
Galvão (30%) as operator, and a 10% stake in the BM-S8 block along with Petrobras (66%) as operator,
Petrogal (14%) and Queiroz Galvão (10%).
 Barra Energia is controlled by U.S. private equity firms
First Reserve (57%) and Riverstone Holdings (26.3%),
and a team of Brazilian entrepreneurs led by João
Carlos de Luca and Renato Bertani (16.7%).
RECENT DEVELOPMENTS
 In May 2013, it was rumoured that China National
Petroleum Corp had offered USD 2bn for a 100%
interest in Barra Energia. First Reserve and Riverstone
suspended the sale due to “contract difficulties and
complicated conditions”, and due to the improving
business environment in the oil & gas sector in Brazil.
 In Aug 2013, Barra Energia received regulatory
approval for the development of the Oliva field, with
first production estimated by 2021.
 In Feb 2014, local media reported that First Reserve has
put up for sale a minority interest in Barra Energia,
with U.S. oil major ConocoPhillips having already
made a bid for a 25% stake.
 In May 2014, Barra Energia completed the drilling of a
second well in the Atlanta field, with first oil expected
by 2016. The area has total 3P reserves of 269 mmbbl of
oil and 311 Mm3 of natural gas.(1)
 In Aug 2014, the company raised USD 100mn for its
Atlanta field in the first reserves-based loan in the
Brazilian offshore sector.
Note: (1) Gaffney, Cline & Associates (GCA), Mar 2014
Source: Company, EMIS Professional
 The pre-salt BM-S-8 block has five
prospects covering an area of 2,089 km2:
Bem-Te-Vi, Bigua, Abaré, Guanxuma and
Carcará (estimated resources of 1 Bboe).
 In 2012, a three-well drilling campaign
showed a high-potential thick column of
at least 471 metres of 31°API oil at the
Carcará prospect. Its recoverable volume
is subject to an appraisal campaign in Q1
2015. According to market estimates, it
could rival those in the nearby oil fields
Lula (8.3 Bboe) and Sapinhoá (2.1 Bboe).
MANAGEMENT BOARD
 João Carlos de Luca, co-founder and
Executive Chairman, president of the
Brazilian Petroleum, Gas and Biofuels
Institute, 40 years of industry experience
at Petrobras and Repsol YPF.
 Renato Bertani, co-founder and CEO,
President of the World Petroleum
Council, 33 years of experience in E&P
projects, former CEO of Thompson &
Knight and director at Petrobras.
 Cesar Cainelli, VP Exploration, geologist,
with 32 years of experience at Petrobras.
 Brian Byrne, CFO and VP Business
Development,
18
years
industry
experience at Citigroup, Wasserstein
Perella and Atlantic Richfield.
 Abilio Arruda, Senior Geophysicist, with
35 years of experience in geological and
geophysical interpretation in Petrobras.
 Shiniti Ohara, Drilling Manager, with 25
years sector experience.
 PE exit of Barra Energia’s majority shareholders is also
considered in the short and medium term.
 High-potential undeveloped assets in the promising
pre-salt oil frontier in Santos basin.
 A debt-free company, with remaining guaranteed
funding commitments of USD 700mn. The funds will
be used to meet the exploration costs for Barra
Energia’s blocks over the next three years.
 Established strategic partnerships with Petrobras,
Queiroz Galvão and Petrogal.
 Management team with a combined experience of over
300 years in building and developing E&P portfolios in
Brazil and abroad.
RECENT TRANSACTION ACTIVITY
Da te
S ta ke
De a l
Va lu e
Ta rg e t
B u ye r
S e lle r
S e p - 11
3 0 .0 %
$ 15 7 mn
BS - 4 b lo c k in
S a n to s b a s in
Ba rra En e rg ia
Ro ya l Du tc h
S h e ll; Ch e vro n
J u l- 11
10 .0 %
$ 17 5 mn
BMS - 8 b lo c k
in S a n to s
b a s in
Ba rra En e rg ia
Ro ya l Du tc h
S h e ll
Ma y- 11
n .a .
$ 2 0 0 mn Ba rra En e rg ia
Un d is c lo s e d
P E firms
n .a .
Ap r- 11
n .a .
$ 5 0 0 mn Ba rra En e rg ia
Rive rs to n e
Ho ld in g s LLC
n .a .
Ma y- 10
n .a .
$ 5 0 0 mn Ba rra En e rg ia
Firs t Re s e rve
Co rp
n .a .
Lupatech S.A.
-11.2%
-8.9%
-19.6%
EBITDA (cont.op.)
10,954
8,130
7,620
% ma rgin
3.8%
3.1%
6.7%
Net profit
(287,807)
(175,947)
(94,363)
-
-
2012
2013
Half-year,
762,417
609,030
Jun-2014
582,475
PP&E
303,919
243,039
234,984
Current Assets
225,391
160,941
152,830
% ma rgin
Balance Sheet
(cons)
Total Assets
of whic h Cash
Total Liabilities
of whic h Debt
648,728
637,520
722,056
 Advised by BofA Merrill Lynch, Lupatech seeks funding
to strengthen its working capital and to invest in
business development, after the completion of the debt
restructuring process. A possible creditor exit is
considered in the short and medium term.
 Significant turnaround potential once a solution to the
cash shortage is found, which would enable the
completion of the backlog (USD 438mn as of Jun 2014)
and higher revenue generation in 2015.
 Strong business fundamentals and potential for
improving gross margins by selling non-core assets and
focusing on the more profitable Services segment, which
has been rapidly growing with 3-year CAGR of 36.3%.
 Positive outlook due to increased requirements for the
share of local equipment and services contractors in the
development of new oil frontiers in Brazil.
 Long-term support from main creditor and shareholder
Brazilian Development Bank (BNDES), in line with its
policy to promote the local oil & gas supply chain.
RECENT TRANSACTION ACTIVITY
Da te
Free Float
28.5%
BNDES 31.1%
GP
Investments
15.9%
Fundação
Petros 24.5%
52wk Range: BRL 0.26 - 1.81 1-Yr Rtn: -36.7%
Mcap, Aug 2014: USD 20.4mn, P/E, (ttm): neg
2
S ta ke
De a l
Va lu e
1
Sep-14
Jul-14
Aug-14
S e lle r
10 0 .0 %
J u n - 13
10 0 .0 %
Ma y- 12
10 0 .0 %
De c - 11
10 0 .0 %
No v- 11
10 0 .0 % $ 2 6 .7 mn
S a n An to n io
Bra s il
Lu p a te c h
GP
In ve s tme n ts
No v- 11
3 7 .4 % $ 12 5 .4 mn
Lu p a te c h
BNDES ,
P e tro s , GP
In ve s tme n ts
n .a .
S te e lin je c t
In je ç ã o d e
Aç o s
Fo rja s Ta u ru s
Lu p a te c h
Oc t- 11
Oct-13
B u ye r
Au g - 14
0.5
0
Ta rg e t
Arg e n tin e
S o p h ia Ca p ita l
$ 3 2 .0 mn o p e ra tio n s o f
P a rtn e rs
Lu p a te c h
Tu b u la r
$ 2 7 .0 mn
Va llo u re c
s e rvic e s
a s s e ts
In d ú s tria
$ 2 2 .7 mn Me ta lú rg ic a
Du ra te x
J a c a re i
Mic ro in o x Hid ro J e t
$ 17 .5 mn Fu n d iç ã o d e Eq u ip a me n to s
P re c is ã o
Hid rá u lic o s
1.5
Sep-13
Source: Company, EMIS Professional
2,572
947,841
* August 2014
 In Jun 2014, Lupatech’s reorganisation plan was
approved by the competent Brazilian and U.S.
Bankruptcy Courts.
 In Aug 2014, Lupatech agreed to sell its operations in
Argentina for USD 32mn, raising a total of USD 112mn
from its divestment programme started in 2011.
8,804
848,982
SHAREHOLDERS AND STOCK*
 In Nov 2013, Lupatech announced a pre-packaged
reorganisation plan, subsequently approved by 85% of
its bondholders. The plan involves debt reprofiling in
addition to swapping 85% of the perpetual and
convertible bonds (est. USD 460mn) for new equity.
 In Jul 2014, Lupatech announced a capital increase of
up to USD 595mn to be subscribed by its creditors and
current shareholders by the end of Sep 2014. Brazilian
banks Itaú Unibanco and Votorantim agreed to convert
all their loans into new company shares.
15,560
856,602
Jun-14
 In Feb 2013, Lupatech announced the election of a new
Board of Directors. Ricardo Doebeli, an economist with
over 18 years of experience in corporate restructurings
and performance improvement projects, became CEO.
% growth
May-14
RECENT DEVELOPMENTS
262,577
Apr-14
 The financial crisis led to a decrease in Lupatech’s
backlog, low capacity utilisation and deterioration of its
financial standing. In 2011, the company began
restructuring its debts and selling non-core assets.
288,231
(cumul)
113,632
Mar-14
 The company was floated during 2006 in an IPO worth
USD 217.8mn. The proceeds were used for acquiring 17
firms in the oil & gas support services sector.
2013
Feb-14
 Lupatech is renowned in the Mercosur market for
industrial valves, automation systems and natural gas
compression equipment, and has 31 units in Brazil,
Colombia and Argentina, with some 2,900 employees.
INVESTMENT RATIONALE
H1 2014
2012
(cons)
Sales
Jan-14
 The company manufactures anchoring ropes for
production platforms, valves, completion tools, gas
compressors and fibre optic sensors, and also provides
drilling rigs and workover, well intervention, coating
and pipe inspection services.
Income Statement
Dec-13
 Founded in 1980, Lupatech is the largest equipment
and services supplier to Petrobras in Brazil.
KEY FINANCIALS, USD thousands
Nov-13
OVERVIEW
10 0 .0 %
$ 7 .9 mn
Lu p a te c h
Lu p a te c h
Lu p a te c h
Lu p a te c h
Odebrecht Óleo e Gás S.A.
OVERVIEW
KEY FINANCIALS, USD thousands
INVESTMENT RATIONALE
 Founded in 2006 as a spin-off of the oil & gas division
of Brazilian industrial conglomerate Odebrecht, OOG
specialises in shallow and deepwater offshore drilling,
production & logistics, subsea construction, offshore
maintenance, well services and E&P management in
Brazil, Angola, Mexico, Venezuela and Argentina.
Income Statement
 Since 1997, the unit has been providing platform
chartering and operation services in the North Sea,
partnering with Danish conglomerate Maersk. The
parent Odebrecht has been active in the sector since
1953, when it established a strategic partnership with
Petrobras, subsequently becoming the first private
Brazilian company to offer offshore drilling services.
% ma rgin
8.0%
-
10.7%
Net profit
(5,048)
(47,071)
(42,150)
-
-
-
2011
2012
2013
1,099,948
1,299,544
1,418,258
 OOG has the largest ultra-deepwater fleet in Brazil of
three semi-submersible rigs and four drill ships with
water depth capacity of up to 3,000 m, two FPSOs with
combined production capacity of 156,000 bbl/d, and
two PLSVs operating at water depths of up to 2,500 m.
PP&E
 OOG is also active in the exploration sector, with a 15%
stake in the oil-rich Block 16, offshore Angola.
RECENT DEVELOPMENTS
 In Feb 2013, the Cidade de Itajaí FPSO, chartered to
Petrobras for nine years, produced its first oil, marking
OOG’s entry into Brazil’s platform chartering market.
 In 2013, OOG signed two new contracts with Petrobras
for a backlog of USD 930mn over eight years, upping
its oil drilling platforms under management to 21.
 OOG ended 2013 with consolidated EBITDA of USD
423mn on revenues of USD 936mn (up 57.2% y/y).
 In Jul 2014, OOG raised additional USD 550mn in a
perpetual notes offering (BBB-/stable, S&P), part of its
successful bank-to-bond model for financing
investments in offshore oil & gas infrastructure.
 In Jul 2014, the company chartered a third PLSV to
Petrobras, in partnership with sector peer Ceona,
reinforcing its positions in the subsea equipment and
services market.
 OOG plans to launch a new ambitious investment cycle
by early 2015, comparable to its USD 5.5bn investment
programme throughout 2007-2015.
Source: Company, EMIS Professional
(non-cons)
Sales
2011
2012
2013
130,114
265,634
349,802
% growth
120.7%
104.2%
31.7%
EBITDA
10,440
(18,846)
37,343
% ma rgin
Balance Sheet
(non-cons)
Total Assets
Current Assets
of whic h Cash
Total Liabilities
of whic h Debt
13,007
13,166
13,878
147,273
197,443
217,428
35,753
30,287
60,266
140,505
394,701
490,874
3,896
217,600
290,699
 OOG does not rule out raising external capital to meet
the increasing domestic demand for oil & gas services,
to fund international expansion in Latin America and
Africa, to diversify its clients and to develop integrated
service offering for the upstream oil & gas market.
(Roberto Simões, CEO, Jul 2014)
 A possible IPO is considered in the medium term.
(Marcelo Odebrecht, CEO of Odebrecht, Sep 2012)
 Integrated business model for Brazilian deepwater and
pre-salt oil & gas exploration, including design
engineering, project management, operation and
chartering of offshore rigs, subsea units and FPSOs.
 Long-term contracts with oil & gas majors, including
Petrobras, Shell, Statoil, Total and ConocoPhillips.
 Positive outlook due to increased requirements for the
share of local equipment and services contractors in the
development of new oil frontiers in Brazil.
 Aggressive top-line growth, 4-year CAGR of 143.8%.
TRANSACTIONS AND SHAREHOLDERS*
MANAGEMENT BOARD
 OOG is controlled by Brazilian
diversified holding company Odebrecht
(81.4%), active in the engineering,
infrastructure,
construction,
naval,
petrochemicals,
transportation,
real
estate, energy and water supply sectors.
OOG’s management has a combined industry experience
of over 130 years:
 In Oct 2010, OOG received an equity
funding of USD 400mn from Temasek
Holdings, the sovereign wealth fund of
the Government of Singapore, in
exchange for a 14.3% stake.
 Hélcio Colodete, Senior Officer Specialised Well
Services, chemical engineer with 35 years of experience
in Companhia Petroquímica Camaçari and Braskem.
 In Oct 2011, Brazilian investment
management firm Gávea Investimentos
(USD 6.9bn AUM) acquired a 5% stake
for an undisclosed sum.
Temasek
Holdings
13.6%
Odebrecht SA
81.4%
*December 2013
Gávea
Investimentos
5.0%
 Roberto Simões, CEO, mechanical engineer with 35
years of experience, ex-manager of Santo Antônio
Energia, Braskem, Construtora Norberto Odebrecht.
 Herculano Barbosa, Senior Officer Engineering and
Technology, engineer with 30 years of experience in
offshore oil drilling.
 Jorge Mitidieri, Senior Officer Integrated Services,
engineer with 30 years of experience, former executive
at North Sea Production Company (joint venture of
OOG and Maersk).
 Pedro Mathias, Senior Officer Drilling Operations,
oceanic engineer, former executive at Transocean.
ABBREVIATIONS
bbl
mmbbl
/d
boe
mmboe
Bboe
3
Mm
3
Barrel
Million Barrels
Per Day
Barrels of Oil Equivalent
Million Barrels of Oil Equivalent
Billion Barrels of Oil Equivalent
Million Cubic Meters
Bm
MMcf
Tcf
Billion Cubic Meters
ANP
AUM
BNDES
CAGR
CPI
D/E
E&P
FDI
FPSO
FX rate
G&G
GDP
IEA
IMF
LTD/Equity
Mcap
MOU
P/E ratio
PE
PLSV
PPP
ROE
S&P
Selic rate
UNCTAD
Brazilian National Agency of Petroleum, Natural Gas and Biofuels
Assets Under Management
Brazilian Development Bank
Compound Annual Growth Rate
Consumer Price Index
Debt-to-equity Ratio
Exploration and Production
Foreign Direct Investment
Floating Production, Storage and Offloading (vessel)
Foreign Exchange Rate
Geological and Geophysical
Gross Domestic Product
International Energy Agency
International Monetary Fund
Long-term debt-to-equity Ratio
Market Capitalisation
Memorandum of Understanding
Price-Earnings Ratio
Private Equity
Pipe-Laying Support Vessel
Purchasing Power Parity
Return on Equity
Standard & Poor's
Special Clearance and Escrow System Rate, Brazil's Central Bank Overnight Rate
United Nations Conference on Trade and Development
Million Cubic Feet
Trillion Cubic Feet
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