March 15, 2019 / 5:14 PM / 3 days ago

UPDATE 1-Petrobras CEO eyes $10 bln of divestments in first four months of 2019

(Adds details on divestment of TAG pipeline, resolution of transfer-of-rights dispute)

By Gram Slattery and Marta Nogueira

RIO DE JANEIRO, March 15 (Reuters) - Roberto Castello Branco, the chief executive of Brazil's Petroleo Brasileiro SA , said on Friday he believes the company will divest some $10 billion in assets in the first four months of 2019, aided by the sale of a major pipeline unit.

At the same event in Rio de Janeiro, Brazilian Economy Minister Paulo Guedes said Petrobras, as the firm is known, has almost settled on terms with the government regarding a dispute over an oil-producing zone known as the transfer-of-rights area. The resolution of that spat would results in billions of dollars more being added to the company's coffers.

Petrobras is aggressively divesting non-core assets in a bid to reduce its hefty debt load, which has steadily fallen in recent years but is still above that of its peers.

On Wednesday, sources told Reuters that the firm is accepting the final round of bids for its TAG gas pipeline unit on April 2, which is expected to bring in several billion dollars and will likely be the company's largest-ever asset sale.

At Friday's event, Castello Branco said he believes the TAG deal will be among the divestments completed by the end of April, bringing Petrobras' total divestments in the first four months of 2019 to some $10 billion.

TRANSFER-OF-RIGHTS

Speaking at the same event, Economy Minister Guedes, without specifying the currency, said Petrobras and the government had started off 60 billion apart in their negotiating positions regarding the transfer-of-rights area, but were now only 2 billion apart. The figures likely refer to dollars, as the two sides at one point each believed they were owed $30 billion.

The transfer-of-rights area is the result of a 2010 deal between the Brazilian government and Petrobras related to a huge share offering that would have diluted the government's stake.

To maintain control of the company, the government sold Petrobras the rights to explore 5 billion barrels of oil in an area off Brazil's coast for 74.8 billion reais at the time. With that money, it bought additional Petrobras shares.

But Brazil's oil regulator now estimates there are around 17 billion barrels of recoverable oil in the area, and the government is seeking to auction rights for the exploration of the excess oil. First, the two sides need to resolve the dispute over the area, which will result in a significant payment to Petrobras. (Reporting by Gram Slattery; Editing by Steve Orlofsky and Dan Grebler)

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