The Brazilian government could pay Petroleo Brasileiro SA Petrobras (ADR)(NYSE:PBR) $16 billion in renegotiating an agreement to advance offshore crude deposits. This update came from the analysts at Itaú BBA.

The highlights

Given government initiatives to lessen a record budget deficit, the leading analysts anticipate the payment to be made in form of oil barrels instead of cash. Local daily Folha de S.Paulo reported last week that the company could get as much as $20 billion in compensation. Itaú BBA released rating of ‘Outperform’ on PBR stock, arguing that the opportunity of strong international supply of oil will help the company.

In 2010, Petroleo compensated the government $43 billion for the rights to advance deposits holding 5 billion barrels of oil present under a layer of salt underneath the ocean floor.

The matter

As per the recent update, the Brazilian government is in the process to compensate $16 billion to Petróleo Brasileiro in renegotiating a $43 billion agreement in 2010 to advance vast offshore crude deposits. In a client note, leading analysts projected that depending on a cost of $60 per barrel, the Brazilian government would have to reimburse the company nearly $16 billion, given the decline in oil prices from over $100 in 2010. Terms of the agreement to the so-named Transfer of Rights Area could be discussed after 5 years.

As per the note, the renegotiation of the oil barrels was seen as a peril by shareholders. Following the latest remarks by government officials, the assessment could actually turn to be beneficial for Petrobras, the only reason being- low oil prices. The compensation amount as per the Newspaper Folha de S.Paulo is different from that of analysts at Itau BBA. Also, the newspaper didn’t reveal as to from where it obtained this information. In a securities filing, Petrobras reported that no call had yet been taken on the matter.

The shares price of Petrobras surged rose 0.26% to $11.43, extending gains to more than 150% so far this year. Itaú BBA has an “outperform” rating on the stock, arguing that the outlook of strong international supply of oil will assist Petrobras, the globe’s most indebted oil firm, reduce costs and sell assets.