Posts Tagged ‘Brazil’

Brazil remains bullish on oil as Petrobras sets new production record in March

offshore-oil-rigPerennial favourite Petrobras (NYSE : PBR), has announced that in March of this year, it surpassed February’s output record by 52,00 bpd. Last month, the Brazilian oil giant produced a record 1.99 million bpd from its domestic holdings. The increase has been attributed to a number of new wells in the offshore Campos Basin being brought into commercial production. Petrobras has also reported domestic production of combined oil & gas for March reached 2.3 million bpd of oil equivalent, a 9.5% month on month icrease, adding in international operations, brings an enviable 2.5 million bpd production average for the month of March.

Following up on Petrobras’ unveiling of its $174 Bn, five year investment plan, this can only be good news for investors, as the company has based its 2009-2013 plan on Brent crude running at $42 a barrel, with financing needs for 2009 based on Brent averaging at $37 a barrel. With Brent crude trading at $50.46, depressed fears over swine fever, a fiar cushion is in place.

On May 1st, President Lula will officially open Petrobras’ new Tupi operations.  Tupi,which is located in the pre-salt region and is estimated to contain between 5 billion and 7 billion barrels of crude, will initially pump 15,000 bpd through a test phase, finally ramping up to 100,000 bpd in 2010. 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 we previously discussed, the planned $175 Bn investment, is also good news for companies supplying the oil business. With offshore oil development vessels likely to be in high demand.

“In the next five to six years, we are looking for 240 different vessels… drillships, storage units, supply vessels, transportation vessels and others,” Petrobras CFO Almir Barbassa told reprorters at recent a seminar held in Seoul. “Petrobras will soon issue tenders for eight floating product storage and offloading units and seven drill ships”

Trading off a 52 week low of just $14.73, Petrobras is currently trading in the $32-$34 range (5 day spread) & the ADR has grown by 37% in the last three months of trading.

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Brazil’s Itaú-Unibanco rides wave of banking consolidation

itau-unibanco1Following last years merger between the number four & number two banks in Brazil last November, the newly forged conglomerate, Itaú-Unibanco (NYSE : ITU) is the frontrunner in a race for consolidation in the Brazilian banking market. The result being that Itaú-Unibanco is now 13% larger than Banco do Brasil and 58% than the other two main rivals, Bradesco (NYSE : BBD) & Spain’s Santander (NYSE : STD). At current prices, Itaú-Unibanco’s combined assets total $201 billion, while Banco do Brasil holds $178 billion and Bradesco $128 billion, only one billion ahead of Santander.

In the credit card segment, Itaú-Unibanco serves an estimated 30% of all credit cards issued in Brazil, which brings circa 36% of all cc revenues, making them far & away the market leader overnight. Unibanco brought a number of strategic assets with it in the November deal, notably Wealth Management with more than R$32.7 billion in assets under management, 14,356 points of service and 17.5 million customers.

Although there are obvious challenges in merging two large companies such as these, Itaú-Unibanco’s Chairman Pedro Moreira Salles remains bullish on expansion. Company executives are rumoured to be looking for international acquistion targets, Mexico being one of the favoured target countries.

“We want to be a bank that has the skill to operate around the world. We aspire to have a global scale” said Salles.

Sector watchers claim that Brazil’s banking consolidation will continue apace in 2009, the expectation being, in three to five years, five banking giants will control 85 percent of the market, with a balance between one public bank (Banco do Brasil), two private Brazilian banks (Itaú-Unibanco & Bradesco), with two foreign banks (Santander & HSBC).

Emerging South refutes WSJ Online

A first for MyStockVoice, until now, all the content on the blog has been compiled by yours truly, however John Baeyens over at Emerging South put together a very interesting post which flicked my switches. Basically John is refuting a report & more importantly the figures attached on a piece in the Wall Street Journal Online.

Can only back him up on this, as the mainstream press do have a habit of manipulating figures to suit their editorial slant. In a classic two legs good, four legs bad article, the WSJ managed to misquote (negatively)  Brazil’s public debt / GDP ratio by a “measly” 20%.

Johns excellent post containing plenty of authoritative links can be read here : Emerging South

Chile leads the way for South American ETFs

london-metal-exchangeWhilst suffering from shrinking export markets, led by the all important 20% supply of global copper, a shrinking economy & climbing unemployment; Chile continues to buck global trends, with ratings agency, Moody’s Investors Service making it the first investment- grade country to be awarded a higher credit rating this year. The South American country’s $22 billion of savings in wealth funds has put it in a position to recover more quickly from the global credit crisis than other, similarly rated nations, Moody’s said yesterday in raising Chile’s foreign debt to A1 from A2 with a positive outlook.

This has been the result of a canny economic long game by President Michelle Bachelet, while near neighbours have splashed out on the commodities boom over the last decade, Chile has followed a prudent path of pumping  profits from state owned copper giant Codelco into soverign funds, providing the nation with a $22Bn cushion against global turmoil. That cushion is equal to roughly 13% of Chile’s GDP ($154Bn), so Chile looks as thought it should weather the storms of 2009 quite nicely.

“Nobody else compares with Chile,” Moody’s analyst Mauro Leos said in a phone interview from New York. “Like everywhere else, they’re getting hit hard. But because of the work they did ahead of time, they can go from a 5 percent surplus to a 5 percent deficit without any additional borrowing.”

Also helping is the price of copper on global markets, which is on a slow uptick, & an expectation that China’s economic recovery package will drive demand for the metal towards the end of 2009, this is reflected in current long term copper contracts on the London Metal Exchange. Central government has acted promptly, with Bachelet committed to a $19.5Bn package incorporating tax cuts & subsidies that should help stymie economic contraction. Even with copper prices at all time lows, economists think that Chile can still exit the current crisis without hitting recession.

Codelco announced its full year results earlier this month, generating a pre-tax profit of $4.968 Bn to December 2008, it is estimated that Codelco has provided an average of $7.5Bn per annum in revenues for the last 4 years. This follows Fitch rating $600M of the company’s debt as “A” back in January.

According to Fitch : “The company had USD 4.6 billion of total debt, of which USD 1.3 billion was classified as short-term. Codelco has adequate liquidity, backed by a track record of accessing debt in the local and international markets and a well-diversified debt maturity profile. Short-term debt is expected to be refinanced through a combination of the 2019 notes, bank loans from undrawn facilities and cash flow from operations.”

Chile’s banking sector is also helping stem the flow, business loans grew sharply in January, despite a deep economic slowdown amid the financial crisis, the country’s superintendent of banks said on Monday. Gustavo Arriagada told lawmakers that loans continued to grow, though at a slower pace, as Chilean banks, in counterpoint to their Western counterparts pass on a series of aggressive from the central bank to customers

“Although we have seen tighter credit conditions in the last few months and a fall in requests for credit, that is due to factors like an increase in risk and worsening of employment conditions and client income,” Arriagada said in his presentation.

This has led analysts to rethink their strategy regards South America, the single country ETF –  iShares MSCI Chile Investable Index : (NYSE : ECH) has seen some good buying activity of late, even if there is a 15% weighting towards Codelco within this product. ECH managed to add 5% over the last five days, with a huge spike in trading in yesterdays surge on the US markets. Along with Brazil / EWZ & Mexico /EWW, it looks as though Chile could be an interesting mid to long term long within the country specific ETFs.

India & China move to secure oil reserves

ongcHaving written about Lukoil making moves for a stake in Spanish oil company Repsol (NYSE – REP), (Russian Energy Bears) I thought it may be interesting to have a look & see what else is going on with regards to securing oil reserves & rights. It would seeem that India’s Oil & National Gas Corporation – Videsh ONGC is in the final stages of acquiring London based Imperial Energy for $1.9Bn.

As Imperial is a Russian focussed player, ONGC had to jump the bureaucratic hoops with the Russian Competition board, which it successfully concluded in mid-October. ONGC agreed to buy  Imperial  in August, valuing the company at 1.3 billion pounds ($1.9 bln).

Analysts at JP Morgan said in a research note on Wednesday that the shares offered a potential 236% annualized return. The bid is conditional on ONGC receiving acceptances in respect of 90% of the shares and ONGC is expected to pull out if this threshold is not met by the close of the offer period. Imperial and its advisors are therefore working around the clock to ensure that all investors tender their shares by the 1300 GMT Dec. 30 deadline.

“We’re leaving no stone unturned,” a source close to the company said. “It’s going to go right down to the wire”.

This follows a long & exhaustive battle earlier this year with Chinese state controlled Sinopec (NYSE – SHI) where the offer had been pushed as high as £12.90 rather than todays price of £12.50. Sinopec is China’s largest oil refiner, which is thought to have carried out due diligence on Imperial and to have requested clearance for a possible bid from the Russian authorities. Some analysts had suggested that a bid proposal from Sinopec might encounter resistence within Russia from officials nervous about ceding oilfield interests to a company controlled by the Chinese State.

The sale means that Peter Levine, the chairman of Imperial Energy, is heading for a cash windfall. The former corporate lawyer, who owns 6 per cent of the company, stands to collect about £90 million if the sale goes through. The grandson of Russian émigrés, Mr Levine, a fluent Russian-speaker, has transformed Imperial from a £2 million minnow listed on the Alternative Investment Market in London four years ago into a £1.27 billion group. Last year he successfully negotiated his way through a dispute with the authorities in Russia that had threatened to jeopardise Imperial’s future in the country.

Having been spurned, the Chinese have played a waiting game, watching as the oil price has heavily declined from $147 a barrell to near $43 a barrel in the last few weeks. On Wednesday, it emerged that China has made an offer to Brazilian oil major Petrobras (NYSE – PBR) of $10Bn in “aid” to assist the company in developing its recent offshore find.

“Conversations with a number of funding sources, including the Chinese development bank, are ongoing,” Petrobras investor relations manager Theodore Helms said today in an interview in New York, without giving more details. The company plans to invest about $30 billion this year, with about half that amount going to Brazilian exploration and production projects, he said.

The Chinese bank has offered Petrobras $10 billion in loans for development of the offshore pre-salt fields known as the Tupi Cluster, a spokesman at the energy ministry in Brasilia, who asked not to be named under ministry rules, said today. This follows State owned CNPC in the securing of oil development rights in Iraq, as reported in November by The New York Times. The United Arab Emirates sovereign wealth fund has also approached Petrobras about financing oil projects in Brazil, he said.

Petrobras on Nov. 21 said it found light oil in two wells off the coast of Brazil’s Espirito Santo state, expanding its pre-salt discoveries. The company in November 2007 said that Tupi, off the coast of Rio de Janeiro, may hold an estimated 5 billion to 8 billion barrels of recoverable oil, making it the largest oil discovery in the Americas since 1976.

So, along with my forecasted long on REP, I am now also looking at PBR as an interesting destination for investing some beer vouchers.

Viva Espana … or at least Bank Santander

 

Whilst watching the demise of some of the worlds oldest & biggest financial institutions & also the dismal rights issues & re-financing by the likes of Royal Bank of Scotland & Barclays, there is a shining light in international banking at the moment. Bank Santander (NYSE – STD)

Whilst Barclays (NYSE – BCS) have gone the route of Sovereign Wealth investments, with a hefty price tag & RBS (NYSE – RBS) had an utterly dismal rights issue, which has resulted in it being  58% owned by the British government, Santander has been busy bolstering itself & its recent acquisitions.

In October, Banco Santander continued its drive into the Anglo-Saxon market by picking up US-based Sovereign this week, it is clear which side the Spanish bank thinks it is on. Santander snapped up the remaining 75% of Sovereign that it did not own for only $1.9bn (£1.1bn).

With its purchase of Alliance & Leicester, picking up Bradford & Bingley’s 200 branches and Monday’s $1.7bn cash injection into its Abbey subsidiary, Santander has used the crisis to become a major player in Britain. Only Lloyds TSB and RBS hold more deposits in the UK. It now holds more than 10% of UK deposits, where other banks have been working on back-office, Santanders strategy of conecentrating on the front end (i.e. the customer) seems to be paying off.

“The winner takes all,” Santander’s chief financial officer, José Antonio Alvarez, told a conference last week, as he explained his bank’s policy of buying while the market was in crisis.

Santander, he said, was planning to “add value by rescuing falling banks at attractive prices”. It would become part of a group of strong banks, he predicted, that would grow at the expense of the weak.

To rub salt into RBS gaping wounds, Spanish banking giant Santander announced a full take-up for its 7.2bn (£5.9bn) rights issue.

Bank Santander Chairman Emilio Botin “I am delighted with the great success of this transaction. It demonstrates once again that Santander’s ability to act quickly, strengthening its core capital to approximately 7%, which is especially important in the current economic scenario. This transaction highlights the confidence & strength of the Spanish economy & its financial system. (Full PR here : Santander )

As discussed in an earlier post, Brazil is going through a wave of banking acquisitions & consolidation, Santander cannily bought up ABN Amro’s Banco Real operation last year, adding this to its existing operations has now resulted in Santander being the number four in Brazil, commonly seen as one of the leading BRIC economies, with total assets now exceeding BRL 330 Billion.

Now there is talk of a bond issue being underwritten by the Spanish government. The initiative includes €100 billion  ($129.4 billion) of state guarantees in 2008 for new financing by credit entities operating in Spain to boost liquidity and jump start lending.

So Viva Santander !!! This boy is going long

UPDATE : since time of writing, The Irish Independant has reported that Allied Irish Bank (NYSE – AIB) could be the next takeover target for Santander.

From Santander’s standpoint, the Irish group’s UK commercial banking operations – which account for just under 20% of profit – would complement Abbey National, which Santander acquired under two years ago, but which is more heavily engaged in retail banking. Integrating the two banks would result in a bidder achieving attractive revenue and cost synergies.

Brazil & ADRs (American Depository Receipts)

 

Was talking with someone a little earlier on Skype chat on Latin America & where these markets are headed when the Dow & NASDAQ & other western bourses are getting slammed.

Interestingly enough, although most indexes on LatAm are way down on a YTD basis, they are all showing signs of moving off their lows at present.

Brazil in particular seems to be attracting inward cash flow, which you can see here on Bank of New York Mellon’s ADR site

The chart below gives you an idea of where Brazil is going when compared to BoNY’s 100 Developing Markets Index, just starting to peak upward. Definitely worth keeping an eye on. With todays momentum, it looks as though its going to break a 10% gain.

Another increasing development is the ensuing wave of consolidation going on within Brazil’s banking industry, as outlined in the New York Times blog.

Banking mergers may be cooling down in the United States, but in Brazil they are just heating up.

The state-controlled Banco do Brasil announced Thursday that it was buying a 72 percent stake in Banco Nossa Caixa for 5.4 billion reals, or about $2.25 billion.

The all-cash deal comes just three weeks after a deal valued at 38.1 billion reals, or about $17.7 billion, was announced between the Brazilian banking giants Banco Itaú and Unibanco. That merger would create the largest bank in the southern hemisphere, with 21.5 percent of the nation’s deposits under its roof.

By acquiring Banco Nossa Caixa, Banco do Brasil would become only the nation’s second-largest bank, much to the chagrin of the Brazilian government.

“We want Banco do Brasil to be far bigger than any other bank in the country,” President Luiz Inácio Lula da Silva of Brazil told reporters on Tuesday.