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Disappointment on Petrobras (PBR). Although it’s disappointment that investors will ultimately get over.

The government is charging Petrobras more than expected to buy 5 billion barrels of oil reserves. (Pre-transfer the company has proven reserves of 15 billion barrels.) The price of $42.5 billion, to be paid in new stock, works out to $8.50 a barrel. That’s more than the $7.50 oil industry analysts had been expecting.

And since the price determines not only how many new shares the company will issue to the government, but also how many shares it will have to offer to minority shareholders in a related rights offering, the higher price works out to a lot of dilution for existing shareholders. The company will sell $32.5 billion in shares in that rights offering.

The total of $75 billion is more than three times larger than the $22.1 billion raised in the Agricultural Bank of China initial public offering. That offering is the largest IPO ever

The deal with the government is part of a complicated financing package. The government gets a bigger stake in the oil company and its recent finds in the deep waters of the South Atlantic and in exchange Petrobras gets 5 billion barrels of reserves that it can use to back addition loans.

That’s not exactly a minor benefit since the company has estimated its capital spending needs at more than $224 billion over the next five years.

But this is exactly where it gets tricky.

Private investors worry that the government is already pressuring Petrobras to make big investments in the lower margin refining business because that fits the country’s need for more domestic production of refined petroleum products. In June the company announced that it was increasing its capital spending on refining to $74 billion from $43 billion over the next five years.

A strange decision from a company which can invest every dollar of capital it can raise in developing higher margin, recently discovered deepwater oil reserves.

It doesn’t help that this financing deal will increase government ownership in Petrobras and the government’s potential influence. Besides getting more shares outright, the government will have the option to snap up any shares in the rights offering that aren’t bought by private investors.

All this has led investors, including some of the biggest of the global big boys such as George Soros’s Soros Fund Management and BlackRock, to sell their Petrobras stake. Soros Fund Management, for example, sold all of its Petrobras stock in the second quarter.

In the short term this deal has certainly depressed the stock. Petrobras is down 25% this year as of September 8.

In the long term, the price of stock will recover from this dilution and these worries about government influence as long as the reserves in the South Atlantic prove out to be as rich as projected. There just aren’t that many big new oil fields in the world anymore.

It just may take a while.

Full disclosure: I don’t own shares in any company mentioned in this post in my personal portfolio.