PRIO buys Albacora Leste for US$ 2.2 billion

02 May 2022

PRIO closed, this Thursday (4/28), the purchase of the Albacora Leste field, owned by Petrobras, in the Campos Basin. With an investment of up to US$2.2 billion, the venture will make the largest independent oil and gas company in the country practically double in size both in production and in revenue and EBITDA. Currently, PRIO produces 34,000 barrels/day, and the acquisition adds another 27,000.

The company estimates an economically recoverable 1P reserve (90% chance of being recovered) close to 280 million barrels for the Albacora East Field, and, net for PRIO, a reserve of over 240 million barrels, expected to be abandoned after 2050. The estimates consider a long-term price of $62 per barrel of oil.

Both companies have been in exclusive negotiations since November of last year. Under the terms of the agreement, PRIO will hold 90% of the business – Repsol Sinopec Brasil (“RSB”) will have the other 10% stake. PRIO will pay 15% of the value of Albacora East now and the rest at the closing of the operation, planned for the end of this year. The asset will be financed with the company’s cash, which is $1.4 billion.

The payment will be in a fixed installment of $1,951 million, with $293 million paid upon signing of the agreement, and a further $1,658 million upon completion of the acquisition and transfer of the operation to the company, subject to adjustments due up to the closing of the transaction (as of October 1, 2022) and compliance with conditions precedent.

The deal also contemplates the possibility of additional payments of up to $250 million, depending on the average annual Brent barrel price in the years 2023 and 2024.

The company has a bold expansion plan. “We always said we wanted to reach 100,000 bp/day. Today, we produce 34 thousand barrels and we just got the Operating License to start drilling the Frade field. Last year we bought the Wahoo field, which can increase production to more than 60,000 bp/day and now, with Albacora Leste, a field that today produces almost 30,000 bp/ and has a revitalization plan that will allow it to reach 50,000 bp/day. That is, we have a plan in place that will take us to 100 thousand bep/day. It won’t be easy, but we will get there,” says Roberto Monteiro, CEO of PetroRio.

About Albacora East

Discovered in 1986, it had its first oil in 1998 and currently has a production of approximately 30 kbbld in March, of API 19º and low sulfur content, through 17 producing wells and 15 injection wells. The Camp covers an area of 511 km².

The Field production is done through the FPSO P-50, with an oil processing capacity of 180 kbbl/d and 6 MMm³/d of gas, and the Field artificial lift system is done through the gas lift system.

About PRIO’s Business Plan for Albacora Leste

During the first 18 months of operation, the company will focus on the following fronts:

– Investments of approximately US$ 150 million in FPSO P-50 to ensure the highest levels of asset integrity and, thus, achieve safety standards and operational efficiency equivalent to other operations. This amount does not include the wastewater treatment project, which is being executed by Petrobras and will be completed before the closing of the operation;

– Capture synergies and implement its operational methodology in order to reach a cost level (OPEX) compatible with the operation of FPSO P-50, close to US$ 90 million per year.
Subsequently, the Field redevelopment campaign will begin, involving the connection or drilling of 17 producing wells and 5 injector wells over 5 years, with estimated CAPEX of $70 to $75 million per well (for 100% of the Field).

Similar to the methodology employed in Friar and Wahoo, the development will be divided into two stages:
– The first, contemplating the connection of 3 producing wells already drilled, 8 new producing wells and 1 injector well, which may increase the production of the Field to levels higher than 50kbpd (100% of the Field), maintaining this level for 2 or 3 years;

– The second, with another 6 new producing wells and 4 injector wells, will follow.
PRIO must also carry out the anticipated decommissioning (until 2027) of 5 producing wells and 1 injector, already contemplated in the price paid for the Field. The company estimates a CAPEX of approximately $15 million per well. The final abandonment of the Field, expected after 2050, is estimated at $800 million.