Archive for the ‘Brazil’ Category

Brazil confirms hydrocarbon strategy

Santos basinMuch has been made of Brazil’s offshore hydrocarbon deposits particularly in the Tupi oil & gas reserves which have been touted by state owned energy firm Petrobras as containing up to 5-8 billion barrels of recoverable oil.

Tupi,which is located in the pre-salt region, is estimated to contain between 5 billion & 8 billion barrels of light crude, & is the world’s biggest new field since a 12-billion-barrel find in Kazakhstan in 2000. The pre-salt region covers an offshore area 800 kilometers long and 200 kilometers wide between the states of Espirito Santo and Santa Catarina, is estimated to contain up to 80 billion barrels of light crude under a thick layer of salt far beneath the ocean floor.

As discussed in a previous article, Petrobras (NYSE: PBR)  & partners including Repsol and BG Group discovered vast deposits of oil under more than 4,000 meters of water, rock and salt in 2006. These deposits are at previously untapped depths and will be costly to extract. It is thought that other reserves may be nearby in other as yet unexplored blocks.

To capitalise, Brazil’s regulatory agency the ANP has announced that it will be excluding Tupi from a new round of block concessions scheduled for spring 2010, as Brazil looks to protect it’s strategic reserves & is currently changing the concession framework for blocks in the area. According to proposed legislation, which is being heavily pushed by President Lula, Petrobras will operate all blocks in pre-salt areas with a minimum 30% stake. Output would belong to the federal government under a production sharing model & participating IOCs will receive a fixed share of the revenues.

This is a canny move & possibly a very good gambit to make, as IOCs are now on the backfoot with new capacity for exploitation becoming scarce. More tellingly, companies such as Royal Dutch Shell, Total, Chevron & Exxon Mobile have come under increasing pressure in countries such as Nigeria & Angola in recent months, especially from Chinese state firms.

Last month, CNOOC, made a bid to acquire concessions in 23 prime blocks in Nigeria, which could see the Chinese state-controlled oil giant securing more than 20% of Nigerian hydrocarbon assets. There has been some speculation that Nigeria may be using the Chinese approach as a heavy hammer to extract more favorable terms on concessions that are due for re-newal, however, it underlines the fact that oil majors must look for more stable environments in which to do business.

ANP Director Nelson Narciso has expressed confidence that oil majors will still be interested in new pre-salt areas despite market uncertainty over the new terms because of both economic & political stability.

“As long as the production sharing agreements are preceded by a fair competition, there is no reason for not being happy with Brazil,” he said. “I expect that if everything goes well, by the end of next year we’ll be in a position to start the bidding for the new pre-salt round”

Lula has a knack of getting his way, as he is seen as being instrumental in pulling Brazil out of the global recession via his socialist policies, which have been very popular with Brazil’s citizens. Our view is that the IOCs will be forced to accept these terms on the pre-salt fields, whilst picking up other concessions in more mature blocks as a sap. We have been bullish on Petrobras for a good while & we see no rason to change that view on the basis of this news.

 

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Positive figures from Redecard will push Brazilian retail bank shares

redecardAs we have discussed in previous articles, Brazil’s retail banking sector has been enjoying a buoyant 2009 so far. This would seem set to continue as payment card processor Redecard posts an 18% jump in financial volumes.

This should be seen as a positive for Itaú Unibanco (NYSE: ITUB), which controls Redecard, as net income for the third quarter rose to BR$333M ($195M), with financial transactions across the payment platform registering BR$ 24.7Bn ($14.52Bn) & more interestingly, the debit card side rising in step by 17% to BR$12.2Bn ($7.13Bn).

Although there is general negativity on global credit card companies, particularly in Western economies, Brazil’s nascent credit sector has benefitted from a wave of bank consolidation over the last 18 months, the strength of the real versus the US dollar & one of the strongest economies to exit the finiancial crisis. Earlier this year, Visa affiliate VisaNet was the star IPO on the BOVESPA, with the launch being hugely oversubscribed by both retail & institutional investors, raising a record of $4.5Bn.

“We think the results were solid and highlight the strength of the credit and debit card markets,” reported Deutsche Bank which keeps a buy rating on Redecard. “While regulation remains a key risk, we think that it is already priced in.”

For Redecard, it is also very much a case of being seen as a Brazilian brand, which seems to be helping it’s positioning against VisaNet, which although no longer owned by Visa, retains the association. Redecard has the benefit of being able to position itself as a multi-brand entity & is more popular with Brazilian retail customers, especially in the growing debit card sector, whilst VisaNet is to some extent still regarded as a premium brand.

So, short term one-up for ITUB & we expect to see shares taking a ride higher over the next few days. VisaNet reports later this week (October 28th), so it will be interesting to see if Bradesco will be able to catch the same sentiment wave.

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HP expands ProCurveOne operations into LatAm

ProCurve-logo-Hewlett-Packard has announced that it will be expanding it’s sales operations for networking division ProCurve from Mexico into the rest of Latin America of its networking division, ProCurve, beyond Mexico. ProCurve products & services will now be available in Argentina, Brazil, Chile, Colombia, Peru, Venezuela & Costa Rica.

“We know we will be using a direct and indirect sales strategy as the ProCurve product line is extensive, and in some cases allows for both sales models,” said Alfredo Yepez, who manages HP’s Lat-Am Enterprise Storage & Servers operations. “Many of our channels today have some type of specialization in the networking area as they have previously distributed solutions from our competitors and are interested in representing ProCurve. So we will leverage the relationship with our current partners that have experience in the networking business as a first step, and then develop other partners in a second stage”

The company has recently lunched HP ProCurveOne, which is a flexible suite of applications from leading ISV’s, including Microsoft,Avaya, McAfee, F5 and Riverbed, that can be integrated into the existing architecture of Enterprises, with management being provided by a central platform.

The new approach from HP (Nasdaq:HPQ) seems likely to pay off, as Felipe Ortega, Manager ProCurve of the recently opened R&D centre in Costa Rica reported, even without selling solutions across Latin America, the company has managed to become the second largest provider of networking products globally, after Cisco (Nasdaq: CSCO), in terms of both revenue & market share.

“We are also developing high-speed chips for networks, software solutions for management and connectivity monitoring of large datacenters. The fourth area is networking security for both wired and wireless networks,” he added.

Original article at MyStockVoice

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Brazilian Banking, a tale of IPO’s & ADR issues

banco do brasilState controlled banking behemoth Banco de Brasil has been involved in a three way battle with it’s private peers Itau-Unibanco (NYSE:ITUB) & Banco de Bradesco (NYSE:BBD) for some time for dominance in the growing domestic banking sector. Having surpassed ITUB in the second quarter, mainly due to lower interest rates attracting borrowers, Banco de Brasil has now announced that is looking to change it’s stance regards international stockholders.

Yesterday, a spokeswoman for the company revealed that the bank is now looking to double the potential foreign ownership in Bovespa traded shares from the current 11% by raising it’s free float of shares to 25%.

On the same call, she also advised that the bank has appointed an advisory bank regards launching an ADR offering on the NYSE, similar to it’s two biggest rivals, the programme could be launched by the end of this year.

“We are talking about two movements that aim to improve the attractiveness of the shares,” Marco Geovanne Tobias da Silva, said in a telephone interview with Bloomberg. “We are increasing the number of potential investors to our shares.”

Banco de Brasil has performed well this year, having outperformed the Bovespa average by some margin. As we have discussed in previous articles, the banking sector in Brazil has been going through a wave of consolidation & the state bank has just added to its growing portfolio via the acquisition of a 49.99% stake in Banco Votorantim for 4.2 billion reals ($2.3Bn) earlier this month.

Meanwhile, Spain’s Santander (NYSE:STD) is now looking at a local IPO that should see an initial raising of $200 million (equivalent to 15% of current valuation) that will be used to expand its reach across the country. At the same time, Santander also said that it will launch an ADR programme for the local listing.

With only a single IPO so far this year with Visa affiliate VisaNet, Brazil now has 12 companies that have registered since the end of July for potential listings. The VisaNet launch was hugely oversubscribed & raised a Brazilian record of $4.5Bn in its sale, much to the benefit of Bradesco.

Much of this is fuelled by local retail interest, as the Brazilian middle classes are growing, however, there are also signs that foreign investors are looking at Brazil as the next BRIC economy to really get going, with Credit Suisse (NYSE:CS) coming out with a bullish statement yesterday.

“Brazil is in style for foreigners,” said Ilan Ryfer at Credit Suisse Hedging Griffo, Brazil’s biggest hedge fund. “Everyone thinks it’s a bull market again and the party’s back. Investors have short memories.”

Much of the excitement around Brazilian stocks is fuelled by its BRIC partner China, as the Chinese economy starts to lift again, commodities are very much back in vogue. South Africa’s Investec Asset Management is looking at Brazil & neighbours Chile & Peru to lead the way in South America, as Chinese demand for raw materials is set to grow.

So Viva Brasilia !! & being a bull on emerging markets & Brazil in particular, I am looking forward to the Banco de Brasil & Santander IPO’s with great interest.

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