France's Perenco Delays IPO Of Brazil Unit For 60 Days

The Brazilian unit of French oil and natural gas company Perenco said late Friday that it was delaying its initial public offering for up to 60 days because of market conditions.

Perenco's planned $511 million IPO succumbed to market volatility after the European Union debt crisis and concerns about sluggish economic growth turned global financial markets on their collective ears in recent weeks. Markets appeared to get a reprieve earlier this week, when Greek lawmakers averted the trade bloc's first-ever debt default by passing a package of austerity measures.

Current market conditions could also lead the company to revise its offer terms, Perenco said in the regulatory filing. Perenco, which was in the bookbuilding process for the offer, also said that it would cancel existing orders and refund investors who had already made deposits on the prospective shares.

Volatile markets also claimed a separate share offer late Friday. Brazilian sugar producer Tereos Internacional (TERI3.BR), a subsidiary of France's Tereos Group, canceled plans for a $368 million follow-on offer.

Oil and natural gas exploration companies, especially, have faced a tough time coming to market in Brazil recently. In November, Karoon Gas Australia Ltd. (KAR.AU) faced a similar dilemma when it canceled plans to raise about $773 million from the IPO of its Brazilian unit.

The depth of the debt problems in Europe were just starting to surface when Karoon canceled the IPO, at the time citing market conditions and a downturn in interest in Brazil's oil and natural gas sector. Like Perenco, Karoon is considered a pure exploration play because it doesn't yet have any production assets in Brazil.

Perenco operates five offshore exploration blocks in the Espirito Santos Basin, in partnership with independent driller OGX Petroleo e Participacoes (OGXP3.BR, OGXPY), part of billionaire Brazilian Eike Batista's industrial empire. The blocks could hold 645 million barrels of oil, according to preliminary estimates made by consultants DeGolyer & MacNaughton.

The company said that it will use proceeds from the share sale to fund its exploration activities, including seismic data gathering. In addition, the company could use the funds to acquire exploration assets in Brazil. Brazil will offer fresh offshore concessions later this year, when the National Petroleum Agency will hold its 11th round auction of exploration and production blocks.

Perenco's decision could also affect the IPO planned by PetroReconcavo SA, which is scheduled for later this year. PetroReconcavo was created in 1999, and produces oil and natural gas from onshore fields in the northern Brazil state of Bahia.

-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; jeff.fick@dowjones.com

--Rogerio Jelmayer in Sao Paulo contributed to this report.

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