Prio shares drop as Brazilian oil regulator halts a key unit

Brazilian oil company Prio announced on Monday that the local regulator ANP ordered a production halt for the Peregrino FPSO. The regulator cited the need to improve risk management documentation as well as adjustments to the deluge system of the unit.

Shares of the independent oil producer fell as a result. The Peregrino field is responsible for a large portion of Prio’s production, and the company recently purchased the remaining stake in the asset.

Prio stated in a filing with the securities commission that Equinor, based in Norway, has started making necessary adjustments to Peregrino. The work is expected to last between three and six week, it said.

Prio, a member of the Peregrino Consortium, is set to take over the operatorship after agreeing to purchase Equinor’s 60% stake in this oil field earlier this year for up to $3 billion.

Last year, it had purchased the remaining 40% of Sinochem's shares in a deal worth nearly $2 billion.

Equinor stated in a press release that it "strictly followed the authorities' requirements" and was working with the ANP findings. Peregrino also produced 97.500 barrels equivalent to oil per day during the second quarter.

Following the news, shares of Prio traded in Sao Paulo dropped more than 5%, the largest decline among the benchmark Brazilian stock index Bovespa which rose 1%.

Santander analysts estimated that a five week stoppage would result in revenue losses of approximately $192 million.

In a client note, they said: "We are unsure if production will resume right away after the adjustments. ANP will probably have to reinspect the unit after maintenance." Gabriel Araujo reported. Leticia Fucuchima contributed additional reporting. Mark Potter (Editor)

(source: Reuters)