Oil and gas giant BG Group was rising higher early on Friday morning, as market chatter speculated that it may be putting a stake in its Brazilian business up for sale.
According to Reuters, Chinese firm Sinopec is among the favoured suitors to buy-up an interest in the unit which operates in the Santos Basin offshore Brazil. The deal could be worth some $20bn, a source told the news agency.
BG said back in June that it had raised the net potential of the Santos Basin to between six and eight billion barrels of oil equivalents (boe), significantly higher than the previous best estimate of three billion boe forecasted in February 2010.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
While Reuters claims that the disposal could come within weeks, analysts at Nomura expect that a deal will not likely be reached until the second half of 2012 or even 2013 - "once production continues to ramp up from the pre-salt and BG is able to give more clarity on future growth options, most notably Tanzania LNG."
Nevertheless, the broker says that the deal "makes sense" and while BG will want to manage its portfolio risk - with Brazil accounting for 40% of net asset value - "it will also want to protect its singe A credit rating as it goes through a period of heavy capital investment."
Nomura values BG's entire stake in the Santos Basin at around $40bn.
"Brazil is a key growth asset in the Group portfolio, offering significant reserves, ease of access to world crude markets, and a growing domestic gas markets," BG writes on its website.
BG shares, which rose to an intraday high of 1,362.31p early on, pared gains and were trading 7.5p up (+0.56%) at 1,339.5p by 11:00.
-
Barclays begins paying up to £100 compensation to customers after banking outageBarclays will pay up to £7.5 million in compensation to customers after its banking services were disrupted by an IT outage
-
Review: Shangri-La Paris – an ode to the world’s best foodNatasha Langan enjoys fine French and Chinese cuisine at the Shangri-La Paris
