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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Petro-Banking

It's surprising who's buying oil assets these days.

Not major oil companies. As we've discussed, firms like Apache have been busy divesting projects globally.

Brazilian oil heavyweight Petrobras has also been selling off assets. Last week the company agreed to sell $380 million worth of oil blocks and pipelines in Colombia.

This follows closely on a bigger divestment, that saw Petrobras sell 50% of its African unit for $1.53 billion.

The really interesting thing was the identity of the buyer. It wasn't a major oil producer. Not even a junior E&P. The purchaser was a bank.

Brazil's Banco BTG Pactual ponied up the billion-dollar sum to buy Petrobras' African assets.

Such direct ownership of exploration assets is an unusual strategy for a big bank like BTG. But it's not a one-off. The bank has made direct ownership of commodities plays part of its growth strategy. It is also reportedly looking to buy mining assets in Africa in partnership with former Vale CEO Roger Agnelli.

This may be a sign of the times. With commodities markets having turned down, most traditional companies in the space are shunning expansion in favour of cash-conservation and asset rationalization.

But that may well be an opportunity for non-traditional buyers like BTG. Such companies today are able to shop for assets with little competition.

That strategy appears to be paying off so far. The African projects of Petrobras were reportedly originally slated for sale at $5 billion. The fact that BTG could eventually pick them up for $1.5 billion suggests the firm may be one of the only games in town on the buy side.

We'll see if this approach ends in profit for the bank. But buying low during depressed times has long been a recipe for making money down the road. It will interesting to see how many other non-traditional players are thinking the same thing in regards to the natural resource space right now.

Here's to seizing opportunities,

By. Dave Forest




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