Petrobras Receives R$ 1.3 Billion Related to Earnout from Sépia Block Exploration

Through a communication, Petrobras informs that the amount received referent to the exploration of the Sépia block was paid in full and with tax deductions.

Petrobras (PETR4; PETR3) received the amount of R$ 1.3 billion in full referent to the earnout from the exploration of the Sépia block in 2022, according to a statement released last Friday, 01/27, after the market closed.

What Is Earnout?

Earnout is a contractual clause applied in mergers and acquisitions that predicts an additional payment conditioned to future business results.

It is a strategy used to facilitate negotiations, for example, when the buyer and seller cannot agree on the worth of a company or an asset being negotiated.

Through this contractual clause, the buyer pays part of the purchase upfront for the company, and the other part is contingent on the future performance of the business.

If the company indeed achieves the projected results, the buyer pays the remaining portion or portions corresponding to the earnout. However, if the company does not perform as well as the projections indicated, the buyer is not obligated to pay the additional amount.

The Amount Received by Petrobras, Referent to the Exploration of Sépia, Already Includes Tax Deductions

The amount referent to the exploration already includes the value of the taxes related to the shares of 28%, 21%, and 21% from Total Energies, PETRONAS, and Qatar Energy, respectively.

The payment is based on a regulation published by the federal government in 2021. The payment is required in the last month of January of the year following the year in which the price of a barrel of oil reaches an annual average of US$ 40 and US$ 70.

“Under the terms of regulation No. 08 of 04/19/2021 from the Ministry of Mines and Energy (MME) and the announcement of the 2nd auction round of the Surplus Transfer under the Production Sharing regime, held on 12/17/2021, earnout values were established for the Sépia and Atapu blocks, which will be due between 2022 and 2032, and collectible from the last business day of January of the year following the year in which the price of Brent type oil reaches an average annual above US$ 40/bbl, limited to US$ 70/bbl,” the state-owned company points out.

It also adds that “Petrobras expects to receive the full payment related to the earnout for the 2022 fiscal year, which is the responsibility of the partners of the Sépia and Atapu blocks, by January 31, 2023,” the state-owned company reported.

Still on Friday (01/27), the state-owned company explained that it has not yet been formally notified about the indication of board members.

“Following the usual procedures for the appointment of administrators, the name of the nominee will have to undergo the internal governance procedures of Petrobras,” explained the state-owned company.

In the case of members of the Executive Board, the final appointment will depend on the approval made by the Board of Directors, under the terms of the law and the Bylaws.