Petrobas Brasileiro Petrobras SA (ADR) (NYSE:PBR.A) Defends US Refinery Purchase

Christine Lawrence - April 17, 2014

Boston, MA 04/17/2014 (wallstreetpr) – Petrobas Brasileiro Petrobras SA (ADR) (NYSE:PBR.A) is Brazilian state-run oil and gas giant, one of the world’s largest in its field. Petrobas has been involved in various scandals recently, but the one involving Pasadena, Texas refinery purchase in year 2006 is company’s major worry. The allegations also seem to be politically motivated as President Dilma Rousseff seeking re-election coming October. Petrobas in a recent senate hearing has defended the purchase while admitting that the deal was not a good buy for the company but asserted that the price paid at the time of acquisition is justified.

The Deal and Senate Hearing

In year 2006, Petrobas Brasileiro Petrobras SA (ADR) (NYSE:PBR.A) purchased Texas refinery from Belgian Astra Oil. The refinery had a capacity of 100000 barrels and Petrobas paid $1.25 billion to acquire it in 2006. However prosecutors alleged that Astra had bought the refinery for just $42.5 million in 2005. Company has written of $500 million of its balance sheet for the investment in refinery.

In a Brazilian Senate Hearing on April 15, 2014 top executives of the company defended the decision to buy Pasadena, Texas refinery in the U.S. Petrobas CEO, Maria das Graças Foster said, that the refinery was purchased in order to maximise returns in the U.S. on Brazilian oil. Ms. Foster also said that they have proof that Astra spent at least $360 million on the refinery and Petrobas paid $554 millionfor refinery assets and $341 for the oil trading unit of Astra. Ms. Foster also said- “With time the project developed a low probability of returning its investment”.

The Fate of the Deal

Though a large number of President Rousseff’s opponents are pushing hard to launch a formal investigation in the alleged deal, company CEO still maintains that the premium paid for the refinery was justified.She also mentioned that the premium paid in order to gain better control over the partnership, and the low returns from the investment can be largely attributed to 2008 crisis that led to slumping in shale oil refining industry. Though it is not yet certain if a formal investigation will be launched in this case but investors hope that these scandals for Petrobas Brasileiro Petrobras SA (ADR) (NYSE:PBR.A) blow off soon.


Christine Lawrence

Christine Lawrence is a financial analyst. She loves analyzing socioeconomic trends in the background of financial moves. She has overall seven years of experience in Auditing, Finance and Writing.

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