Meanwhile, Reuters also reported the same day that Petrobras has denied hiring JP Morgan to handle the sale of oil exploration licenses- “Petrobras denies hiring JPMorgan for subsalt license sales”. On Wednesday, Reuters reported that Petrobras hired JPMorgan to advise on the sale of about U$3 billion in assets. Some of the assets included property and licenses outside the subsalt area.
Troubled Brazilian rig-owner Sete Brasil gathered management, lenders and shareholders for crisis talks this week, seeking the best solution among options ranging from restructuring to a full scale write-off.
Brazilian institutional lenders, such as the national development bank BNDES and the banks and pension funds with stakes in Sete Brasil, were asked to study several scenarios. “There are huge writedowns whichever way you look at this project. Large sums of money that were supposed to be for items such as engineering or equipment have been swallowed up by shipyard construction projects and the cash-flow problems at the parent companies,” said one source.
Restructuring Sete Brasil is made more difficult by the fact that the special-purpose companies set up to build each of the 29 rigs Sete Brasil has ordered are connected by joint liability clauses, meaning penalties, writedowns and losses on any rig have to be absorbed collectively.
The restructuring options are also taking into account the harsh reality facing the shipyards, whose payments from Sete Brasil ceased in November. Following the news of probable cancellations from Estaleiro Atlantico Sul (EAS), the three drillships that were to be built at the Estaleiro Rio Grande yard in southern Brazil are seen as surefire candidates for the same fate, given the problems facing the Engevix group.
“Enseada is holding on, and is being encouraged to do so by the politicians who are interested in the survival of Sete Brasil, but the BNDES is unwilling and unable to be pushed into disbursing loans after the revelations about bribery and corruption reached Sete Brasil,” a banking source said. BNDES could yet throw Sete Brasil a lifeline, and sources said a decision on loan disbursement will be made by 15 March.
Another sticking point is the decamping of several drilling companies that had signed up to operate the rigs and take a small equity stake.
Upstream understands that Etesco-OAS and Petroserv have pulled out, while Odfjell is on the verge of doing so due to international lenders’ hardline stance over the company’s partnership on this project with Galvao Engenharia, one of the many Brazilian companies facing allegations for involvement in the bribery and kickbacks schemes that apparently infested Petrobras.
“Galvao Engenharia is not going to make it easy by quietly walking away from its investment,” said one of those involved in the Sete Brasil talks.
The remaining operaters are Odebrecht O&G, Queiroz Galvao O&G and Seadrill, but there is a growing risk that this list will shorten.
Sources said that a comparison of the kind of writedowns to be expected from a restructuring as opposed to a wholesale write-off of the Sete Brasil project were not as clear-cut as might be expected.
A restructuring option would need to cover writedowns from cancelled rigs and penalties for late delivery, while a writing off the entire project would still leave some scope for raising cash from the sale of assets now owned by Sete Brasil, including half-built rigs, and avoid new risks.
There is a lot of political will for rescuing the Sete Brasil project, however, and the most likely outcome is a restructuring with significant writedowns, sources said.
Source : OCBC Investment Research / Upstreamonline.com