Two Brazilian oil & gas players unveil merger plans

Brazilian oil and gas company PRIO, formerly known as PetroRio, has inked a deal to combine with a compatriot firm Dommo Energia.

PRIO announced on Thursday that it had entered into a memorandum of understanding (MOU) with Prisma Capital for the potential business combination with Dommo Energia.

Based on the terms of the MOU, this merger will be implemented through the incorporation of the totality of shares issued by Dommo, by a directly or indirectly controlled subsidiary of PRIO. Therefore, for each share, the shareholders of Dommo will receive redeemable shares of the incorporating entity on the date of the transaction or R$1.85 (around $0.35) to be paid within 90 days after the transaction date.

In addition, the MOU underlines that for six months after signature, Prisma commits to grant PRIO exclusive negotiating rights and to complete the transaction. Moreover, PRIO explains that the conclusion of this deal is subject to the usual conditions precedent of transactions of this nature, such as the approval of Dommo’s shareholders and the Brazilian antitrust authority (CADE), among others.

Domo Energia’s oil and gas portfolio entails blocks in the Brazilian sedimentary Campos and Santos basins. The firm obtained the exploration and production rights – as an operator – for blocks BM-C-39 and BM-C-40 in 2007, which became part of the Tubarão Martelo field after exploration and development.

This field is located south of the Campos Basin, next to the Polvo field, at a distance of 86 km from the city of Armação de Búzios, on the north coast of the State of Rio de Janeiro. Back in August 2020, Domo Energia ceased to be the operator of this concession but retained a 20 per cent interest.

Furthermore, PRIO says that Dommo has the rights to 5 per cent – after royalties – of the Polvo and Tubarão Martelo cluster’s revenues. This cluster produces approximately 17.5 thousand barrels of oil per day. According to the Brazilian player, the cluster will be subject to another revitalization campaign in the future.

As a reminder, PRIO’s first cluster came into being after the tieback between the Polvo and Tubarão Martelo fields was done in July 2021.

Currently, the firm is working on a second production cluster through the tieback between the Wahoo and Frade fields for which the firm submitted a development plan to the National Petroleum Agency, Natural Gas and Biofuels (ANP) in December 2021.