Lula wants oil for Petrobras deal at $10 -paper

* Lula wants a price close to ANP’s $10-12 range

* Valuation process key to determining stock offer size

BRASILIA, Aug 28 (BestGrowthStock) – Brazilian President Luiz
Inacio Lula da Silva wants the government to charge oil giant
Petrobras around $10 for each barrel of oil to be used in an
oil-for-shares swap linked with a massive stock offering, Folha
de S.Paulo reported on Saturday.

A person involved in the negotiations told Folha the
government would set the price closer to the range defended by
the oil and energy industry regulatory agency ANP — between
$10 and $12 a barrel.

That is much higher than the $5 to $6 that both Petrobras
(PETR4.SA: ) (PBR.N: ) and analysts see as fair given the
uncertainties of operating in the relatively untested deep
waters. The valuation of the oil is a crucial step to calculate
the size of a capital injection program for Petrobras.

Under the oil-for-shares capital program, the government
will give Petrobras access to up to 5 billion barrels of
offshore oil in exchange for shares in the company, while
minority shareholders will buy stock to retain their stakes.

The newspaper said a higher price for the oil could allow
the government to increase its stake in Petrobras after the
capitalization. If the oil-for-shares swap is bigger than
investors have estimated then minority shareholders would have
to inject more money into the company to avert heavy dilution,
Folha said.

The Rio de Janeiro-based company expects to sell up to $25
billion of new shares to stockholders by September and complete
the oil-for-shares swap which the government estimates at up to
$50 billion before the Oct. 3 presidential election.

ANP and Petrobras have been at odds about the price,
because the government is obliged by law to maximize the price
of the resources to benefit the country’s citizens who own
below-ground natural resources.

For Petrobras, which needs cash and the oil to undertake an
ambitious plan to tap billions of barrels of oil in deep-sea
ocean waters, a price higher than $6 could make the venture
costly and risky.
(Reporting by Ana Nicolaci da Costa)

Lula wants oil for Petrobras deal at $10 -paper