Market pressures reshape Brava’s strategy as it seeks to streamline operations and stabilize finances
12/18/2024
Brava Energia, formed through the merger of oil companies 3R and Enauta, is evaluating its asset base to unlock capital and improve cash flow. The company announced on Tuesday an exclusive agreement to divest assets in Rio Grande do Norte. However, according to Pipeline, Valor’s business news website, this is only a fraction of a broader divestment strategy.
Brava has enlisted investment bank Itaú BBA to seek a buyer for all its onshore assets—a move previously suggested by one of its shareholders, Maha Energy, earlier this year. Sources indicate that shareholders aim to structure the business to generate quicker returns via dividends.
The company’s largest shareholders, Bradesco and Jive, acquired their stakes by converting Enauta’s debt, reflecting a financial rather than a strategic interest in the enterprise. Bradesco holds 12.2%, Jive 7.1%, and Maha Energy 4.7%.
Brava hopes to secure a premium price for the assets based on its investments, though analysts predict challenges. The company invested $2.1 billion in its onshore portfolio, but analysts at BTG Pactual estimate its current value at $1.9 billion. Assuming a buyer absorbs all associated debt, the transaction could yield approximately $700 million in equity for shareholders.
Debt and high capital expenditure requirements are driving the divestment. Rising interest rates have exacerbated leverage pressures, further impacting cash flow. At the end of the third quarter, Brava reported a consolidated net debt of R$9.06 billion and a leverage ratio of 2.7 times EBITDA over the last 12 months.
The company took its first step Tuesday by signing an exclusivity agreement with Azevedo e Travassos and Petro-Victory Energy for oil and gas concessions in Rio Grande do Norte. The 30-day exclusivity period will allow negotiation over 11 concessions in the Potiguar Basin, where the average daily production from January to November was about 250 barrels.
In a statement to the market, Brava Energia described its newly signed contract as “the beginning of the portfolio optimization strategy” without providing further details.
Brava Energia emerged from one of the swiftest mergers in Brazilian stock market history. Initially, 3R Petroleum had been in talks for a merger with PetroReconcavo, exploring a strategy to combine onshore operations while spinning off offshore assets. However, hesitation within PetroReconcavo’s board shifted the trajectory. This opened the door for Enauta’s creditors, who were navigating a financial restructuring, to seize the opportunity.
At the time of the merger’s announcement, the two companies boasted a combined market value of R$13.75 billion. Since then, external pressures—including stock market volatility, fluctuating oil prices, a strong U.S. dollar, and rising interest rates—have weighed heavily on the newly formed entity. Brava’s current market value stands at R$9.8 billion.
The original story in Portuguese was first published on Valor’s business news website, Pipeline.
*By Maria Luíza Filgueiras
Source: Valor International