RIO DE JANEIRO (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, said the government will likely boost its 32 percent stake after a planned share sale.

As part of new oil regulations, the government is selling Petrobras the right to produce 5 billion barrels of oil in offshore areas in exchange for new shares in the company. Existing investors will also have the right to buy shares in the offering to maintain the level of their shareholding. Brazil’s Congress still has to approve the planned changes.
“Naturally, not all shareholders should participate in the capital increase, which is common in any issuance,” Petrobras Chief Financial Officer Almir Barbassa, 62, said on Friday in an interview at the company’s headquarters in Rio de Janeiro. “Thus, there is a tendency that the government increases its stake. Whether that is desirable, only the government can say.”
Folha de S. Paulo newspaper reported on Friday that the Brazilian government plans to raise its stake in Petrobras, as the company is known, to more than 50 percent of total capital, citing Energy Minister Edison Lobao.
--------------‘Period of adversity’
“This capital increase comes soon after a period of adversity” in global markets, said Lucas Brendler, who helps manage 5.9 billion reais ($3.2 billion) at Banco Geracao Futuro de Investimentos, including Petrobras shares. “So the question is: Will minority shareholders have the financial capacity to increase their stakes?”
Petrobras preferred shares rose 32 centavos, or 1 percent, to 32.51 reais in Sao Paulo trading. The shares have risen 42 percent this year, compared with a gain of 51 percent for the Bovespa Index.
The capital increase may occur in the first half of next year, following approval of new regulations for the so-called pre-salt oil region, Barbassa said.
“It should happen as soon as the law is approved by the Congress,” he said, adding that “120 days would be a reasonable time to expect the approval of the proposals.”
The government attached an urgency clause to the regulations, which is a request for legislators to pass the bills within three months. Opposition parties want more time to debate the rules.
Petrobras plans to spend $174.4 billion over the next five years, the world’s largest corporate investment plan. Out of that amount, the company plans to invest less than $30 billion in the development of offshore oil fields in the pre-salt fields, where crude is trapped under the sea bed.
-----------‘Fundamental element’
“The capital increase is a fundamental element for the company today because we are already investing more than our Ebitda,” Barbassa said, referring to earnings before interest, taxes, depreciation and amortization. “The capital increase gives us an additional leverage to continue to grow.”
Itau Unibanco Holding SA said in a note to its clients Sept. 2 that the minimum capital increase of Petrobras may be between $25 billion and $50 billion. Itau based its minimum range on a price of $5 to $10 per barrel of oil rights.
Petrobras’s Barbassa on Friday declined to estimate the value of the transaction.
---------------No difference
Whether all investors exercise their full rights to buy shares “doesn’t make any difference, because the government already has control of Petrobras and minority shareholders don’t have a voice in the company,” says Catarina Pedrosa, strategist for Latin America at Sao Paulo-based Banif SA. “The only difference is to guarantee the resources the company needs.”
Brazil is following countries from Venezuela to Russia in taking greater control of crude reserves after prices rose to a record $147.27 a barrel last year.
Petrobras will be the sole operator of all pre-salt oil fields still to be exploited. The company also will hold a minimum 30 percent stake in all joint ventures set up to bid for licenses.
The pre-salt region runs 800 kilometers (500 miles) along the Brazilian coast and has oil deposits beneath a layer of salt resting as deep as 3,000 meters (9,843 feet) beneath the ocean surface and another 5,000 meters below the seabed. It includes the Tupi field, the largest oil discovery since Mexico’s Cantarell in 1976.