Petro-Victory Energy has entered into a binding memorandum of understanding (MOU) with Azevedo & Travassos Energia for its acquisition by the rival upstream oil and gas company.
Listed on Canada’s TSX Venture Exchange, Petro-Victory Energy operates in Brazil’s oil and gas sector with an asset portfolio spanning 276,755 acres across 49 concession contracts.
Meanwhile, Azevedo & Travassos Energia focuses primarily on the Potiguar Basin in Brazil.
The deal will position Petro-Victory as a subsidiary under Azevedo & Travassos. It will enable current Petro-Victory shareholders to transition to stakeholders in Azevedo & Travassos.
To facilitate the transaction, Azevedo & Travassos plans a capital increase through the private placement of 205.48 million units at BRL0.73 ($0.13) each, generating gross proceeds of BRL150m ($27m).
Following this increase and upon meeting necessary conditions, claims held by Petro-Victory shareholders will convert into new common shares. Subsequently, these shares will be acquired by Azevedo & Travassos, which will distribute 266 million of its shares to Petro-Victory investors.
Petro-Victory’s shareholders on record at closing will receive a 10% gross overriding royalty from new production on existing or newly created fields post-MOU. This excludes specific reservoirs in the São João Field involved with Eneva.
The royalty applies for 15 years from commercial production commencement or from closing for already producing fields. Additional contingent payments may arise from partnerships involving Petro-Victory and its affiliates.
Azevedo & Travassos is set to take over Petro-Victory’s outstanding debt, with the transaction valued at approximately $39.5m. Execution depends on regulatory approvals and comprehensive audits by both companies.
Completion of the deal requires shareholder approval and adherence to timelines following the capital increase. Both parties are conducting due diligence to prepare for a definitive agreement expected within 120 days post-capital increase completion.
