The shares were offered at a 2% discount to Petrobras’ closing share price on Thursday – a much higher price than markets had originally expected, showing just how high demand for the shares was. Petrobras says it’s planning to use the cash for an ambitious five year, $224bn investment plan that will develop recently discovered oil reserves in the ‘pre-salt fields’, which are located more than a mile beneath the sea bed about 115 miles off Brazil’s Atlantic coast. Naturally, that's going to be an expensive business, because not only are the reserves under the sea-bed, but they're hidden by thick layers of salt which will be particularly difficult to drill through. In fact, it's going to be so expensive that they're expected to have to raise another $50bn or so in the next few years to keep the plan funded.
But while oil might be a pretty safe bet, there has been some disquiet about the level of influence the Brazilian government is likely to have over the company. It already owned about a third of the shares (plus more than half the voting stock) and it's stake is likely to get bigger after this round of fund-raising - the rights issue was actually delayed for a few months while Petrobras thrashed out a deal with the government about how many shares it would receive in return for giving the company access to an estimated 5bn barrels of oil. And with just under a week to go before the Brazilian presidential elections, President Luiz Inácio Lula da Silva has also been keen to highlight his control over the country's burgeoning oil industry (he even went as far as to preside over a ‘special ceremony’ during the rights issue this morning, to celebrate the fact that the offering has transformed the company into one of the biggest players in the world).
Still, that didn't stop investors flocking to today's offering. All being well, Petrobras is going to be pumping an awful lot of oil out of the sea bed in the next five years. Regardless of the Government's involvement, its stock clearly looks like a one-way bet at the moment.