Soros Hedge Fund Bought Petrobras Stake Worth $811 Million

By Jeb Blount and Miles Weiss
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Aug. 15 (Bloomberg) -- Billionaire investor George Soros bought an $811 million stake in Petroleo Brasileiro SA in the second quarter, making the Brazilian state-controlled oil company his investment fund's largest holding.

As of June 30, the stake in Petrobras, as the Rio de Janeiro-based oil producer is known, made up 22 percent of the $3.68 billion of stocks and American depositary receipts held by Soros Fund Management LLC, according to a filing with the U.S. Securities and Exchange Commission. Petrobras has since slumped 28 percent.

Soros has increased his mining and commodities holdings, a move that accelerated in the first quarter with purchases of such companies as Cia. Vale do Rio Doce, the world's largest iron-ore producer, and Talisman Energy Inc., a Canadian oil and gas company. In November, Petrobras announced the discovery of Tupi, a field with as much as 8 billion barrels of reserves, making it the largest find in the Americas since 1976.

``Petrobras has something that other oil companies don't have: oil -- lots of it and they're going to find more,'' said Ricardo Kobayashi, equity fund manager with UBS Pactual SA in Rio de Janeiro, which manages about $5 billion of stocks, including shares in Petrobras. ``If you can buy now and hang on, if you have the staying power, it's great.''

Tupi is part of a new deepwater offshore region known as the pre-salt that may contain as much as 50 billion barrels, according to Peter Wells, oil analyst with the U.K.'s Neftex Petroleum Consultants Ltd.

Share Slump

The drop in Petrobras' U.S.-traded common shares since June 30 would have reduced the value of Soros's disclosed stake by $235 million.

Soros Fund Management didn't report holding any Petrobras shares at the end of the first quarter. It did disclose much smaller stakes in the Brazilian oil company during 2007, including 150,000 depositary shares, with a market value of about $17.3 million, at Dec. 31. The hedge fund company also had calls on another 35,000 shares at Dec. 31.

Petrobras shares traded at an average closing price of $64.83 each during the second quarter, when Soros bought the stake. The shares today dropped 91 centavos, or 1.8 percent, to $50.68 in New York, valuing Petrobras at $204.8 billion, the world's 11th-biggest company by market capitalization.

Soros funds also bought almost 9.5 million shares of Lehman Brothers Holdings Inc. during the second quarter, according to today's filing. Soros funds held 10,000 Lehman shares at March 31, just before the second quarter began.

Lehman shares closed at $19.81 each on June 30, giving Soros's stake in the New York-based brokerage a market value of about $187.7 million when the quarter ended. Lehman shares have since declined 18 percent, reducing the stake's value to $153.5 million.

Michael Vachon, a Soros spokesman, didn't immediately return a telephone call seeking comment.

To contact the reporters on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net; Miles Weiss in Washington at mweiss@bloomberg.net.