Petrobras raised $70 billion last week in what was considered the biggest share offering globally. The Brazilian state owned Oil Company now has the financial footing it required for its planned vast offshore oil reserves exploration. Petrobras had planned the share offering as it sought funds for its $224 billion war chest.

Petrobras’ investment plans are the world’s biggest oil exploration plans and target the 2010/2014 period. The massive investment is expected to turn the country into a major energy exporter. In the share offering, Petrobras sold 1.87 billion preferred shares at 26.30 reals per share, stated a regulatory filing statement. Petrobras sold 2.4 billion new common, or voting, shares at 29.65 reais each.

However, the offering faced lots of uncertainties, causing a prolonged sell off of Petrobras shares that took off over $70 billion off its market value. However, investors have remained optimistic as they seek exposure to the biggest global oil finds in recent decades that outweighed worries about growing state involvement in the company’s affairs.

Analysts said the deal was priced at a very tight discount that was comforting to know because the market expected it to price lower. Brazilian markets are expected to be very successful and in a good “mood.” According to investors, the deal's 2 percent discount to Thursday's closing price was much smaller than what investors expected.

The record-setting stock sale, which was larger than what the company originally planned but fell short of the maximum it had filed to sell, had total demand of $87 billion, a source with knowledge of the deal told Reuters. The bids included 98 billion reais ($57 billion) from existing shareholders and $30 billion from institutional investors, a source with knowledge of the transaction said.

Sovereign wealth funds from the Middle East and Asia were among the investors buying into the offering, the source said on condition of anonymity. The offering had "tremendous demand" from U.S. mutual funds, the source added. Petrobras said in the filing that it may sell another 188 million new shares to meet demand in the next 30 days.

Petrobras or Petróleo Brasileiro S.A. is a semi-public Brazilian multinational energy company headquartered in Rio de Janeiro. Petrobras is the world's fourth-largest public listed company, the largest company in Latin America by market capitalization and revenue, and the largest company headquartered in the Southern Hemisphere by market value.

26 Sep 2010.