The petroleum industry works under a distinct business dynamics. Petroleum companies are constantly changing its assets portfolio across the globe guided by a combination of factors, which include the reorientation of its strategic planning, new evaluation of the investment scenario (including interpretation of geological data, economic feasibility and political risks) and new business opportunities in different locations. Furthermore, the perception of the risk involved in each project and the appetite to assume risks are important drivers in the companies' decision making process on whether investing in determined country or area. Thus, while a geological, economic and political assessment carried out by one company may persuade it to disinvest in determined area, the scrutiny of the same area by other company may recommend it to step in or to increase of its current investments in such area.
In this regard, the transfer of petroleum exploration and production ("E&P") rights play a crucial role in the petroleum industry, being an opportunity to host countries and petroleum companies to, respectively, attract more investments and have additional access to petroleum assets, especially when the bid rounds for the granting of petroleum E&P rights are not held so frequently. A good example was the gap between the 10th Bid Round (2008) and the 11th Bid Round (2013) in Brazil. It also may work as an financing instrument by petroleum companies, since the consideration paid by the buyer may be used by the seller to finance its work commitments in the same area or elsewhere.
Worldwide, the transfer of petroleum E&P rights is performed under two principal mechanism: the farm-in/farm-out transactions (i.e., asset acquisition) and the share acquisition. While the first one involves the direct acquisition of interest in a determined petroleum agreement and associated assets from the company which holds them, the second regards to the acquisition of the majority or all of the shares in the company which hold interests in a determined petroleum agreement and underlying assets, which results in a change of control of the ultimate beneficial owner of the E&P rights.
In line with the international practice, the Petroleum Law (Law No. 9478/97), under the general legal authorization granted by the Brazilian Constitution, expressly provides for the possibility of the transfer of rights under concession and production sharing agreements for the E&P of...