petrobras plans world's largest stock sale, page-2

Brazilian state oil company Petrobras has filed to sell up to $64.5 billion ($A70.35) of new stock -- the largest in capital markets history -- sending its stock sharply higher after months of uncertainty that dragged on its share price.

The global stock offer could be expanded to as much as $US74.7 billion if underwriters exercise a "greenshoe" option to sell an additional 564 million shares to meet extraordinary demand as the company raises funds for the world's biggest oil exploration program.

That would easily top the $US22.1 billion initial public offering by Agricultural Bank of China earlier this year, as well as the $US36.8 billion share sale by Japanese telecommunications company NTT in 1987.

Despite lingering investor concerns about growing government sway over Petrobras and the possibility of share dilution, the announcement helped investors regain confidence in a stock that slumped as much as 25 percent this year on uncertainty over the plan.

"It's better to have a tragic end than an unending tragedy," said Marcio Macedo, who oversees about $US40 million of assets at Humaita Investimentos in Sao Paulo.

"Investors may not have liked the way they carried out the deal, but this is a world-class asset. There's no way you can't own it."

Petrobras preferred shares were up four per cent at 28.71 reais in late afternoon trade, near the stock's high for the day. and 2.17 billion new common shares.

At Thursday's closing prices, it would raise 67.8 billion reais ($US39.2 billion) with the common shares sale and 43.8 billion reais ($US25.4 billion) from the preferred shares.

The offer includes a $US43 billion state-backed swap of oil for shares in which Petrobras will trade new shares for rights to produce 5 billion barrels of offshore oil.

The company faces scepticism from some investors who have questioned the price of $US8.51 per barrel for the reserves to be used in the oil-for-shares swap, considerably higher than the $US5 to $US6 per barrel that analysts said was fair.

Petrobras expects to begin bookbuilding on Friday and price the share sale on September 23.

The plan has become the financial cornerstone of the company's $US224 billion, five-year investment plan meant to turn Brazil into a major oil exporter by tapping crude buried deep under the ocean floor in a region known as the subsalt.

Petrobras ranks fifth in oil and gas production among the world's publicly listed oil companies, according to its own figures, with output of 2.53 million barrels of oil equivalent, an amount nearly equal to that of US-based Chevron.

It expects by 2017 that its output will surpass that of Shell, BP, Exxon Mobil and Chevron, mostly due to new production from the subsalt wells.