Chinese duo exits as local firm pays $1.92 billion for stake in Brazil’s giant offshore field

Brazilian oil and gas company PRIO, formerly known as PetroRio, has expanded its footprint off the coast of Brazil by acquiring non-operated interests of two Chinese players in a field offshore Rio de Janeiro, said to be Equinor’s largest operated field outside Norway.

PRIO has confirmed the closure of all conditions precedent and the formal procedures for its acquisition of 40% interest in the Peregrino and Pitangola fields. As a result, the company has been cleared to join the consortium with Equinor, the operator of the Peregrino asset, which holds the remaining 60% stake in this field.

The Brazilian player signed a sale and purchase agreement (SPA) in September 2024 with SPEP Energy Hong Kong and Sinochem International Oil for the acquisition of Sinochem Petroleum Netherlands Coöperatief, which indirectly holds a 40% interest in the Peregrino and Pitangola fields.

The acquisition is valued at $1.92 billion and includes a $191.5 million payment upon the signing of the contract, plus $1.72 billion on closing, alongside the net working capital and other usual price adjustments for this type of transaction. While the price net of the adjustments was anticipated to remain between $1.67 billion and 1.72 billion, the company and its subsidiaries also had $632 million in tax losses on December 31, 2023.

According to the reserve certification report by DeGolyer and MacNaughton (D&M), prepared at PRIO’s request, and considering a long-term oil price of $62 per barrel, it was estimated that economically recoverable reserves and resources (1P+1C) for the Peregrino field were close to 338 million barrels from January 1, 2024, with a net volume of 135 million barrels for the Brazil-based player, entailing an abandonment date forecast for after 2037.

The conclusion of the acquisition is expected to boost the firm’s production level by approximately 35,000 barrels per day. PRIO also saw synergies in marketing the field’s oil, as each offtake from Peregrino of about 650,000 barrels could be combined with cargo loads from other fields operated by the company to optimize logistics.

Discovered in 1994, the Peregrino field, which had its first oil in 2011, is located 85 kilometers off the coast, in the Campos Basin, within blocks BM-C-7 and BM-C-47, and 28 kilometers from the Polvo and Tubarão Martelo cluster. The field’s production is carried out through the FPSO Peregrino, which has an oil processing capacity of 110 kbbl/d and 300 kbbl/d of water.

Peregrino also has three fixed platforms: Peregrino A, B, and C. The field’s infrastructure is operated by Equinor and owned by the consortium. This field is currently in its second development phase, encompassing the installation of the fixed Peregrino C platform and the drilling of new wells.

The new platform started operating in the field in October 2023. This followed the start-up of the gas import project with natural gas being delivered through Petrobras’ Rota 2 gas pipeline, which came after the restart of production at the Peregrino field, which produces approximately 88 kbbl/d, through its 26 producing wells and 6 injection wells.

During the summer, Equinor booked Archer on a two-year assignment in Brazil, which was slated to start in November 2024, in direct continuation of the latter’s deal for drilling operations and maintenance on the Norwegian state-owned firm’s Peregrino A and B platforms. 

A few months ago, Prysmian provided PRIO with a solution for its tie-back project in the pre-salt layer off the coast of Brazil, envisioned to connect fields 30 kilometers away to an FPSO, enabling fast-tracked development of the oil project.