In its biggest divestiture ever, Brazilian state-run oil giant Petrobras (NYSE: PBR) (BM&F Bovespa: PETR3, PETR4) agreed to sell its 1,560 miles natural gas pipeline Nova Transportadora do Sudeste for $5.2 billion, to a consortium led by Canada’s private equity giant Brookfield Asset Management Inc. (NYSE: BAM) (TSX: BAM.A), with the participation of British Columbia’s pension fund, China’s CIC, Singapore’s sovereign wealth fund GIC, and private equity firm First Reserve. The deal is subject to approval by the board of directors of Petrobras and Brazilian government authorities.
So far this year, Petrobras had sold $3.9 billion in assets, of a total $15.1 billion target for divestments expected by the end of this year. Downsizing efforts have accelerated since May, when Pedro Parente was appointed as CEO of Petrobras, which is burdened with over $120 million in debt, the largest of any global oil firm.
Brookfield, Canada’s largest private equity and alternative asset manager, has roughly $225 billion in assets under management. The firm invests in the property, power, and infrastructure sectors. Brookfield is based in Toronto, Canada with additional offices across North America, South America, Europe, Asia, and Australia.
Brookfield, formerly known as Brascan Corp, was founded in 1899 as a builder and operator of electricity and transport infrastructure in Brazil, reflected in its earlier name which combined “Brasil” and Canada.
The move would follow Brookfield’s agreement last month, to buy Brazilian engineering conglomerate Grupo Odebrecht’s 70 percent stake in water and sewage group Odebrecht Ambiental for $1.65 billion. Odebrecht Group, Brazil’s fourth largest private group, is a global conglomerate consisting of diversified businesses in the fields of engineering, construction, chemicals and petrochemicals.
In June 2015, Brazilian authorities arrested the group’s chief executive Marcelo Odebrecht, in connection with an ongoing probe into bribes paid by Petrobras, which has seen Brazil’s former President Dilma Rouseff recently impeached, and her predecessor Luiz Inácio Lula da Silva, embroiled in the scandal. In March 2016, Marcelo Odebrecht was slapped with a 19-year prison sentence, for paying over $30 million in bribes to executives of Petrobras, in exchange for contracts and influence.
In January, Brookfield acquired a 57.6 percent stake in power generator Isagen SA (Bolsa Colomb: ISAGEN) from the Government of Colombia for $1.99-billion, the largest privatization deal in the country in nearly a decade.
WELL-OILED INTER-AMERICAN CROSS-BORDER ENERGY DEALS
In July, Petrobras agreed to sell a 66% stake in its offshore exploration block BM-S-8 license in the Santos basin, to Norway’s Statoil ASA, for $2.5 billion. The divestiture included a substantial part of the Carcara oil discovery, said to be one of the largest in the world in recent years.
Meanwhile, last week Anglo-Dutch global oil and gas operator Royal Dutch Shell plc (NYSE/LSE: RDS-A) chief executive Ben van Beurden indicated at a conference in New York that the company is in the middle of a strategic review of its downstream assets in Argentina, as part of a global $30 billion divestment program.
Shell Argentina subsequently clarified in a statement that “in response to the global circumstances of our industry and the objectives behind our combination with BG, we are conducting a strategic review only of our downstream business and assets in the country,” which include its Dock Sud refinery in Buenos Aires, retail gas stations, chemicals, propane gas, aviation and maritime fuels, and lubricants.
Shell’s 676 gas stations in Argentina, bring its market share to 19 percent, the second largest after state-owned YPF SA, which has 1430 stations with a 40 percent market share.
“Upstream assets aren’t included in the review as shale investments are a priority for the company. Shell does not want to lose its presence in Argentina, and has a strong commitment to the country,” added Joel Glotzer, a Shell spokesperson in Argentina.
Juan Jose Aranguren, Shell’s previous CEO in Argentina for 12 years and an energy industry veteran with nearly four decades of experience, was one of the foremost business critics of former President Christina Kirchner. He was a key adviser of current President Mauricio Macri, and became Argentina’s new Energy Minister, now in the public eye due to electricity and gas rate hikes which the new administration is struggling to implement in the face of strong resistance.
The appointment of Teófilo Lacroze as CEO of Shell in Argentina, replacing Aranguren in March, brought about a new era as the company is changing its global business strategy, in the midst of a new local ecosystem and more conducive dialogue and relationships with government authorities.
“I see myself more in a scenario where the external relationship with the authorities involves greater dialogue and building the future, with more internal focus on developing the sector, both downstream (products leaving the refinery and reaching the final consumer) in which we want to grow above average, as well as upstream (required for crude exploration and extraction), to move from a pilot stage to production,” Lacroze said earlier this year.
Two weeks ago, Marcelo Mindlin, controlling shareholder and president of Pampa Energia (NYSE: PAM), the largest integrated electricity company in Argentina, which bought 67.19 percent of Petrobras Argentina (PESA) in May for $892 million, became PESA’s president. Pampa’s acquisition of PESA included 269 gas stations, a refinery in Bahia Blanca, shares in Transportadora Gas del Sur (TGS), thermal and hydroelectric power plant Genelba Picún Pichi Leufu, several petrochemical plants in Bahia Blanca and Santa Fe, and a series of oil basins. Pampa also controls Transener, the largest network of high voltage transmission in Argentina, and Edenor, the largest electricity distributor in Argentina. Mindlin is a former founding partner of IRSA, and vice chairman of Cresud, APSA (formerly Alto Palermo SA), Dolphin Fund Management and Hoteles Argentinos.
In 2012, through their Axion Energy unit, the Argentine Bulgheroni Group‘s Bridas Corp., a joint venture with China’s state owned enterprise CNOOC (China National Offshore Oil Corporation), acquired over 600 Esso service stations from Exxon Mobil, for $800 million.
In 2011, Oil Combustibles, controlled by Cristóbal López, acquired a Petrobras refinery in Santa Fe, Argentina, togehgter with 365 gas stations for $110 million. Oil Combustibles is currently in the midst of insolvency procedures (“concurso de acreedores”).
“Lower oil prices continue to be a significant challenge across the business, particularly in the Upstream. We are managing the company through the down-cycle by reducing costs, by delivering on lower and more predictable investment levels, executing our asset sales plans and starting up profitable new projects,” Shell’s van Beurden said in late July, after reporting that Shell Q2 earnings plunged 72 percent.
At the end of August, after an oil spill in the Gulf of Mexico 97 miles south of Louisiana under investigsation by the U.S. Bureau of Safety and Environmental Enforcement, Shell agreed to sell four Green Canyon offshore blocks, referred to as the Brutus/Glider assets, to EnVen Energy Ventures LLC, for $425 million in cash.
Two weeks ago, Compañía de Petróleos de Chile COPEC SA (SNSE: COPEC), one of the largest companies in Chile, agreed to acquire MAPCO Express Inc., with 348 convenience stores, from Delek US Holdings Inc. (NYSE: DK) for $535 million in cash. Delek US is a diversified downstream energy company with assets in petroleum refining, logistics and convenience store retailing.
A week earlier, Canadian Alimentation Couche-Tard Inc. (TSX: ATD.A ATD.B), one of the world’s largest company-owned convenience store operators, agreed to acquire San Antonio, Texas-based CST Brands Inc. (NYSE: CST) for $4.4 billion. CST operates over 2,000 locations throughout the Southwestern United States with an important presence in Texas, Georgia, the U.S. Southeast Region, New York and Eastern Canada. CST also controls the general partner of CrossAmerica Partners (NYSE: CAPL), a gas distributor to more than 1,100 locations in the United States.
In July, Dallas, Texas-based Alon USA Energy Inc. (NYSE: ALJ), an independent refiner and marketer of petroleum products, retained JPMorgan to explore strategic alternatives including a sale of the company or some of its assets. Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 gas stations and convenience stores in Texas and New Mexico. Alon’s largest shareholder is Delek US Holdings Inc., with a stake of roughly 48% which it acquired from Israel’s Alon Group for $572 million in April 2015.
In June, Canada’s largest retailer, Loblaw Cos. Ltd (TSX: L), said it is seeking to sell its “gas bar” operations for CAD $400 million (USD $308 million). Loblaw’s gas station network is one of the largest in Canada, consisting of 212 retail fuel sites with adjacent grocery stores.
Photo: Argentine President Mauricio Macri with Marcelo Mindlin, President of Pampa Energy, at World Economic Forum in Davos, in January 2016.