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Sete Brasil Shareholders Approve $3.9 Billion Investment Capital Increase

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March 11, 2012

RIO DE JANEIRO -(Dow Jones)- Shareholders of Brazilian drilling-rig holding company Sete Brasil approved a capital increase as the company prepares to line up financing to fulfill one of the world’s largest-ever orders for the vessels, Sete Brasil confirmed Friday.

Shareholders granted Sete Brasil’s request to increase the company’s capital to 7 billion Brazilian reais ($3.9 billion), the company said in an emailed statement. Sete Brasil was created with BRL1.9 billion in seed capital in 2010 by eight local pension funds, banks and state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras.

“The increase in equity is a guarantee to obtain financing,” Sete Brasil said. The increased funds will also give the company “greater ballast” as it invests $27 billion over the next eight years to build drilling rigs and possibly other vessels for Brazil’s oil and natural gas industries, Sete Brasil said.

In February, Sete Brasil won a tender to build 21 drilling rigs for Petrobras. The company had previously won an order to build seven drilling rigs. Construction of the drilling rigs is a key step in a series of large offshore equipment contracts Petrobras plans in order to develop the pre-salt oil fields. Petrobras needs a massive amount of drilling capacity to develop the fields, which are expected to nearly triple the company’s crude oil and natural gas production to 6 million barrels a day by 2020.

Sete Brasil Chief Executive Joao Carlos Ferraz also said in February that the company was in the process of raising about $6.5 billion from current and new investors for its investment plans, including letters of commitment from U.S. investment firm EIG Group and Brazil’s Lucce Drilling. EIG Group has pledged BRL500 million, with Lucce entering the holding company with a BRL300 million investment.

“Sete Brasil also has had conversations with other interested investors, but there are no signed agreements with prospective new shareholders,” Sete Brasil said.

Brazil’s National Development Bank, or BNDES, will also provide about $13.5 billion in financing for 80% of equipment and services purchased in Brazil under local content rules, Ferraz said at the time.

-By Jeff Fick, Dow Jones Newswires

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