June 26, 2018 / 3:24 PM / a year ago

Exclusive: EIG, Warburg Pincus bid for mature Petrobras oilfield clusters

By Alexandra Alper and Carolina Mandl

FILE PHOTO: Brazil's state-run Petrobras oil company headquarters are pictured in Rio de Janeiro, Brazil May 8, 2018. REUTERS/Sergio Moraes/File photo

RIO DE JANEIRO/SAO PAULO (Reuters) - Warburg Pincus- and EIG Global Energy-backed firms have placed bids for shallow water mature oilfields being sold by Brazil’s state-controlled producer Petroleo Brasileiro SA (PETR4.SA), five sources said, as the private equity firms seek to carve out a presence in Latin America’s top oil producer.

Two people familiar with the bidding process said the clusters located in the Campos basin off the coast of Rio de Janeiro state are likely to fetch proposals of around $1 billion in total, which would help boost a wider effort by Petrobras to sell assets and reduce debt.

EIG Global Energy Partners would provide equity backing for a bid by Brazilian energy firm Ouro Preto Óleo e Gás for the Enchova and Pampo clusters, according to two people familiar with the matter. It remains unclear how the bid would be structured.

Goldman Sachs (GS.N) will also provide debt financing for the bid, the sources said.

Trident Energy, a Warburg Pincus-backed firm specializing in mid-life oil assets, also bid for the clusters, two sources said. In 2016, Warburg Pincus invested $500 million in Trident.

Alternative asset manager Carlyle Group LP had considered bidding, but opted to pass. It is not clear whether Petrobras has received other bids in addition to those from Ouro Preto and Trident for these clusters.

A win by either group would represent those private equity firms’ debut in the oil production business in Brazil, but not a first for the sector. First Reserve Corporation and Riverstone Holdings both are investors in Brazil’s Barra Energia.

World class geology and dwindling reserves mean the world’s top oil majors have invested billions of dollars to take stakes in Brazil’s prolific deep water oilfields in recent months.

But smaller oil companies are often better than large ones at cutting costs and some have honed expertise in squeezing more oil out of mature fields.

“It makes sense for private equity to be interested,” said Edmar Almeida, an economics and energy researcher at Federal University of Rio de Janeiro, noting that the areas still have relatively strong production and could see their recovery rates improved.

“The novelty is that these funds were not very enthusiastic about Brazil,” he said, citing billionaire Eike Batista’s ill-fated OGX oil company which collapsed under a massive debt load as weak production shattered investor confidence. “Their return would be good news.”

Ouro Preto, the local oil company whose bid is getting backing from EIG, itself is led by former OGX president Rodolfo Landim.

A sale of the mature field clusters, located in Rio de Janeiro state, would also make financial sense for Petrobras, the world’s most indebted oil company, as it seeks to offload $21 billion in assets from 2017 to 2018.

However, Petrobras’ unions have opposed the sales of fields in the past and bids by the company to unload other assets have met resistance from the courts.

According to Petrobras, the Enchova cluster, which includes the Marimba, Enchova, Bonito, Enchova Oeste Bicudo and Pirauna fields, has 32 wells producing 25,100 barrels of oil equivalent per day.

With 27 wells, the Badejo, Pampo, Linguado and Trilha fields of the Pampo cluster produce 13,500 barrels of oil equivalent per day. Petrobras is selling the rights to the fields until 2025. Both Enchova and Pampo began producing in the 1980s.

Trident, EIG and Carlyle did not immediately respond to a request for comment. Petrobras, Ouro Preto and Goldman Sachs declined to comment on the matter.

Editing by Christian Plumb and Susan Thomas

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