Brazilian energy giant Petroleo Brasileiro SA, better known as Petrobras (NYSE: PBR), shattered previous share-sale records by raising nearly $70 billion from a share sale, proving wrong the critics who had warned that the company's offering would not draw investors because of high government influence, wrong.

The Rio de Janeiro-based company said Thursday that it planned to sell 2.29 billion common shares for 29.65 Brazilian reals each -- or a fraction below Thursday's stock market closing price -- and has priced 1.79 billion shares of preferred stock at 26.30 reals each. That also includes American depositary receipts -- each representing two voting shares, which were priced at $34.49 -- and preferred ADRs priced at $30.59, the company said in a regulatory filing.

In total, the company has sold $67 billion worth of shares.

The share sale broke a previous record set in 1987, when Japanese telecommunications company Nippon Telegraph & Telephone raised $36.8 billion.

Petrobras said banks appointed to manage the share sale also have a greenshoe option to buy another 188 million shares worth about 5 billion reals. Citigroup (NYSE: C), Bank of America Merrill Lynch, Morgan Stanley (NYSE: MS), Credit Suisse (NYSE: CS), HSBC, JPMorgan, Deutsche Bank (NYSE: DB), Societe Generale, and a handful of Brazilian and Spanish banks were appointed to manage the share sale.

Last month, Petrobras said it hoped to raise as much as $25.4 billion from sale of preferred shares and another $39.2 billion from the sale of common shares. The company had received the green light from investors to raise up to $85 billion from the share offering.

The share sale, Petrobras said, will fund its ambitious $224 billion five-year investment plan, which is aimed at nearly doubling crude-oil output to 3.9 million barrels a day by 2014.

Petrobras is beefing up its war chest as it expands its hold over the massive, but difficult-to-reach, oil finds off the Brazilian coast. Brazilian President Luiz Inacio Lula da Silva has repeatedly cited these oil finds as key drivers for the country's future development.

In August, the company said it had struck an oil-for-shares deal with the government that will see the company acquire 5 billion barrels of deepwater crude reserves off the Brazilian coast in exchange for stocks worth $42.5 billion.

Market analysts welcomed the share-sale announcement, saying its shows investors' appetite for risk.

"The Petrobras sale means there is appetite for risk from all kinds of investors," said Gerardo Roman, head of stock trading at the Actinver exchange in Mexico City. "This is something historic for the region and the world."

Michael Yoshikami, chief investment strategist at YCMNET Advisors, agrees. The share sale, he said, indicates Brazil's growing clout globally: "When you're able to place $70 billion in shares, that's pretty impressive."

Analysts said investors are confident that Petrobras is poised for growth even as most other global energy majors are being challenged because their reserves are being depleted.

"In Petrobras, you have an obvious growth profile," said Robbert van Batenburg, head of equities research at Louis Capital Markets.

"They face growing pains while other guys struggle to replace reserves," he said.

According to analysts, the massive success of the share sale suggests that investors are backing Petrobras' plans to overtake industry rivals such as Chevron (NYSE: CVX) to emerge as the world's No.2 energy giant.

Analysts said Petrobras can even overtake No.1 oil producer Exxon Mobil (NYSE: XOM) in terms of oil production by 2015 if it meets the targets set in its current business plan. The Brazilian company plans to boost its oil production by 7.8 percent this year, compared with Exxon's target increase of 3% to 4% this year. At the end of 2009, Petrobras said it had 12.1 billion barrels in proven reserves of oil equivalent, about half of the almost 23 billion barrels that Exxon reported at the time.

Meanwhile, despite the record share sale, many people have expressed concerns. When Petrobras announced the oil-for-shares swap last month, analysts had criticized the deal, as it works out to $8.51 per barrel, or well above the $5 to $7 analysts cited as fair market value, given the uncertainties of operating in the relatively untested deepwater.

The deal would also undervalue the company's tradable shares and dilute its earnings, the analysts had warned.

At that time, news that Petrobras planned a massive share sale had also left some investors concerned that the company would come under greater state control, especially if the government picked up a considerable number of shares.

The fears were not unfounded. The government, which already owns 40% stake in Petrobras and controls the company through 55.6% of voting shares, said the share sale helped it increase its stake in the company to 48%. Brazilian Finance Minister Guido Mantega said on Friday that figure includes minority stakes held by state-owned banks.

"The government is increasing its stake in the company by twisting the arms of the shareholders," said Francois Moreau, an independent energy analyst based in Rio de Janeiro. "The company's commercial mission is being replaced by a political mission."

According to Mark Mobius, who oversees about $34 billion as executive chairman of Templeton Asset Management, the share sale is an "abomination and a terrible violation of shareholder rights."

"We may be entering an IPO bubble. It means that people are just not looking at the values and irrationally buying these things," Mobius said in a Bloomberg interview.

"The question is: Who were the buyers?" he said.

Like Mobius, Edward Maran, a portfolio manager at New Mexico-based Thornburg Investment Management, is concerned about the government's influence.

"Brazil is not on a list of major drilling rig builders," and if the government forces economically unsound decisions on the company, things could turn ugly, said Maran, whose company holds ADRs in Petrobras.

Petrobras' ADRs closed down 1.88% at $34.92 Friday on the New York bourse.

International Business Times, The Global Business News Leader

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