By Jeff Fick
Of DOW JONES NEWSWIRES
RIO DE JANEIRO (Dow Jones)--Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, will likely complete its planned share offer - expected to be one of the biggest ever - by late July or early August, Chief Financial Officer Almir Barbassa said Tuesday.
The process will start later this month when said the company will call a shareholders meeting to approve an increase in Petrobras' capital, Barbassa said during a conference call with analysts.
While Barbassa offered a clearer timeline on the share offer, he did not offer much clarity on the size of the offer or the affect contentious congressional debate on the government's planned oil-rights swap could have -uncertainties that have caused Petrobras shares to slide nearly 20% so far in 2010.
The share offer is expected to be among the world's largest ever launched at between $50 billion and $60 billion, analysts have estimated.
Petrobras plans to raise enough cash to fund its 2010-2014 investment plan, plus pay off the government for oil rights the company is to receive under a capitalization plan, Barbassa said.
"We want to have everything ready by the end of July to complete both operations," Barbassa said. "If the oil-rights swap isn't approved by July, we'll just go ahead with the share offer."
Petrobras expects to complete work on the 2010-2014 strategic plan before the shareholders meeting, he said. The company gave previous guidance that the investments would be between $200 billion and $220 billion, up from the $174.4 billion earmarked for 2009-2013.
The share offer was expected to be completed hand-in-hand with a complicated capitalization plan proposed by President Luiz Inacio Lula da Silva last year.
Under the plan, Petrobras was to receive the rights to explore and produce 5 billion barrels of crude as part of a government infusion of capital into the company. Petrobras was to pay the government fair-market value for the oil in new shares, and minority shareholders will be allowed to accompany the share offer.
The transfer of oil rights held by the government, however, must be approved by Congress - which has been bogged down in an ongoing debate over royalties and other parts of Lula's overhaul of Brazil's oil laws. Complicating matters is that 2010 is also a presidential election year.
Petrobras decided to go ahead with the share offer because of the delays, saying in late April that it would base the size of the share offer on direct negotiations with the government to establish a value for the oil rights. Those talks have not yet started.
The value of the oil rights also was to be established by two audit reports contracted by Petrobras and Brazil's National Petroleum Agency, or ANP. Petrobras hired DeGolyer & McNaughton, while the ANP's report is not expected to be ready until September. Adjustments could be made later should the two reports establish different values.
"We don't expect there to be big differences in value between the two reports," Barbassa said. "The belief is that our evaluation should give a reasonable idea of what the final value per barrel will be."
There is also some flexibility to adjust production volumes up or down to account for different values, he noted.
Despite the uncertainties, Petrobras expects demand for the offer to be strong - as long as market conditions settle down after the recent fiscal crisis in Europe.
"I would say it's a stock that is well-placed in the market," Barbassa said. Investors looking for growth, as well as exposure to the oil sector and Brazil's booming economy, will be interested in the share offer, the executive noted.
"I think it's a good offer," he said.
Petrobras shares traded 0.3% higher at 29.92 reals ($16.74) as of 1416 GMT. The shares were in line with the broader market, which was 0.4% higher at 63,099 points.
-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; email@example.com