3R Petroleum S.A. had recently acquired from Petrobras a group of oil fields known as the Macau Polo. This acquisition marks the first time a private equity fund has taken over the operation of an onshore oil field. Starboard Asset will be the managing fund manager of 3R Petroleum, a company set up to manage onshore fields.
Campos Mello Advogados took part in all stages of the process, including negotiating with Petrobras, structuring the debt assumed by the fund and forming equity.
An interview with Paulo Almeida Lopes, Partner at CMA.
Why is this a good deal for all involved?
The transaction itself sets a precedent that is likely to help boost local production by the extraction of maximum capacity from mature fields developed by state oil company Petrobras over the past few decades.
Under Starboard´s perspective, the deal brings the opportunity for private equity investors to access a business segment outside the more common targets such as: technology, retail market and FinTechs. A steady cash flow in stable currency, coupled with the perspective of upsides resulting from the capture of synergies, operational optimisation and production increase, are factors that notoriously attract this profile of independent investors.
The financing structure complexity was one of a kind.
With daily production rates that exceed 2MM boe and a medium-term investment programme ranging the dozens of billions of dollars for the development of pre-salt discoveries alone, the transaction, along with other similar divestment initiatives, brings to Petrobras not only the financial resources it will demand, but more importantly the shift in focus and priority to business opportunities that are more commensurate with the company’s magnitude.
What challenges arose when advising Starboard Asset? How did you navigate them?
The funding of the deal resulted from Starboard’s efforts to bring together a myriad of investors profiles, which included a number of institutional investors, two first-tier financial institutions and a major German energy player through its O&G affiliate.
The financing structure complexity was one of a kind. Partially funded by equity from private investors with the set-up of a dedicated fund by Starboard, the structure also involved Starboard’s coordination of financing through two sets of privately issued debentures and one publicly offered to the market under local SEC equivalent rules.
The success of the partnership between Starboard and Campos Mello Advogados that resulted in the signing of the acquisition documents in a transaction as complex as Macau, was essentially the result of the combination of the company’s strategic thinking and commitment to its investors’ expectations, with the latitude and depth of the Firm´s services platform and business acumen. Partner Marcus Bitencourt brought in his unparalleled experience as a corporate and private equity lawyer to the project’s corporate and financial structure coordination which was pivotal to the successful results achieved.
How do you ensure negotiation with the other companies involved in the transaction runs smoothly?
By being open-minded enough to understand the important issues that may affect their ability to converge to mutually acceptable solutions, and take a proactive, business-oriented approach to shorten distances in a manner that is respectful to all involved. That is the very essence of the professional profile of a member of the Campos Mello Advogados organisation.
