Brazil’s oil junior 3R to acquire Enuata for $1.2 billion amid consolidation wave

Leda Alvim, Bloomberg May 19, 2024

(Bloomberg) – Shares in 3R Petroleum Oleo e Gas SA rallied after the Brazilian oil junior agreed to acquire Enauta Participacoes SA in an all-stock deal, the latest move in a wider consolidation of the country’s oil industry.

Enauta holders will get 0.8092 share of 3R Petroleum for each of their shares in the transaction, according to a filing Friday. Based on Enauta’s shares outstanding and 3R’s closing price Thursday, the deal is valued at about $1.2 billion. 3R will hold 53% of the new company, while Enauta’s shareholders will account for the remaining 47%.

The combination will create a company with a production potential of more than 100,000 bpd of oil and natural gas.

3R shares rose as much as 4.1% in trading Friday. Enauta climbed as much as 1.7%. Both have rallied more than 16% this year amid discussions for a possible deal.

The two companies signed a memorandum of understanding in April to create a single, larger entity. 3R also considered a potential combination with PetroReconcavo SA, another Brazilian oil producer, but it suspended those efforts when Enauta proposed its offer.

All three are part of a group of Brazilian oil companies that were able to expand by acquiring assets from state-controlled Petroleo Brasileiro SA. However, under the Luiz Inacio Lula da Silva administration, Petrobras has reversed course and is no longer selling oil fields to raise cash, prompting the smaller producers to consolidate.

Once the deal is concluded, Enauta will become a subsidiary of 3R, and its shares will no longer be traded in the local stock market. The deal is subject to approval by both company’s shareholders during a meeting on June 17, as well as Brazilian regulators.

At the same time, Maha Energy, one of 3R’s shareholders, agreed to roll up its 15% holdings in 3R Offshore. Maha will receive new ordinary shares issued by 3R, which is equivalent to 2.17% of the total voting and share capital of the new company.

The combination of 3R and Enauta “will create one of the leading and most diversified independent companies operating in the Latin American oil and gas chain,” said Kjetil Solbraekke, chief executive officer of Maha Energy, in a statement.

Décio Oddone, Enauta’s CEO, will be appointed chief of the new company, while 3R’s chief financial officer, Rodrigo Pizarro, will take on the same role at the new entity.

Itaú BBA and BTG Pactual acted as financial advisers to 3R, and XP and Citigroup as financial advisers to Enauta.  

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