(Bloomberg) -- The deals scene in Brazil’s oil patch is heating up after a second producer made an offer for a merger with 3R Petroleum Oleo e Gas SA, sending its shares soaring.

Enauta Participacoes SA said Tuesday that a combination with 3R would create a company with a production potential of more than 100,000 barrels a day of oil and natural gas. 3R already is considering a potential combination with PetroReconcavo SA, another Brazilian oil producer that has oil fields on land. 

3R rose as much as 7.3% in Sao Paulo, bringing its market cap to about $1.6 billion. The shares are up 27% this year on the news that it is a takeover target. Meanwhile, Enauta fell as much as 8.7%, the most since May, while PetroReconcavo dropped as much as 7.8%, also the biggest decline since May. 

3R, Enauta and PetroReconcavo are part of a group of Brazilian oil companies that were able to expand by acquiring assets from state-controlled Petroleo Brasileiro SA. However, under the Luiz Inacio Lula da Silva administration. Petrobras has reversed course and is no longer selling oil fields to raise cash, prompting the smaller producers to consolidate.

“The consolidation of the upstream sector in Brazil will start to gain traction after years of a surge in new players in the competitive arena, mainly due to the Petrobras divestment process,” Citigroup Inc. said in a note.

3R said in a separate statement that it will take up to 30 days to review Enauta’s proposal and will temporarily suspended its efforts to combine with PetroReconcavo.

Under Enauta’s proposal, 3R would issue new shares to exchange for Enauta shares. 3R shareholders would make up 53% of the new company while Enauta holders would have 47%. Enauta said the deal would be a 12% premium over 3R’s market value, but didn’t disclose financial terms.

Enauta is proposing to exchange shares without the need for carve-outs, waiver fees or restructuring corporate guarantees, and called it a “superior transaction” compared to the PetroReconcavo offer. 

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PetroReconcavo would take 3R’s onshore assets under its proposal, while leaving the offshore fields with 3R. One of 3R’s shareholders, Maha Energy, originally proposed 3R’s merger with PetroReconcavo in January.

“After this new offer, 3R’s bargaining power may increase,” Guide Investimentos said in a research note. “We will hardly be able to predict the outcome of any of the proposals.”

--With assistance from Leda Alvim.

(Adds details on the proposal in second paragraph and analyst comments throughout.)

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