Brazilian energy company Enauta has proposed a merger with 3R Petroleum that would lead to the establishment of one of the largest independent oil and gas entities in Latin America.

Enauta's board has given the green light to the merger, which is anticipated to deliver a balanced portfolio with high organic growth over the next five years and the capability to add value amid market fluctuations.

The new entity is expected to offer significant operational, commercial, financial and risk management benefits.

Combined production is projected to exceed 100,000 barrels of oil equivalent per day, with proven and probable reserves surpassing 700 million barrels.

The merger aims to capitalise on the companies' strategic assets, enhancing their competitive edge in the region.

The transaction is predicted to boost share liquidity and average daily trading volume for the merged company.

Enauta and 3R believe that the merger will lead to a rapid revaluation of their securities, potentially exceeding their current individual market values.

The share exchange proposed by Enauta is designed to streamline and simplify the deal process, avoiding waiver fees or restructuring in corporate guarantees.

Subject to due diligence, which is to be completed within an exclusive 30-day period, the merger also hinges on standard conditions and negotiations of definitive agreements.

Shareholder approval at extraordinary general meetings and regulatory consent, including from Brazil's Administrative Council for Economic Defence, are also required.

Enauta emphasised the strategic benefits of merging with 3R Petroleum over other proposals.

The company stated: “An Enauta and 3R merger presents a superior transaction compared to that proposed by Maha in a public letter to 3R’s shareholders, in terms of strategic positioning, governance, tangible synergies and from a risk management perspective.

“Results will be promptly and objectively shared across shareholders of both companies, without hindering a future pursuit of operational synergies identified by Maha in optimisations with PetroRecôncavo and with other operators, in a model that minimize[s] inefficiencies.”

Meanwhile, 3R Petroleum said it had halted negotiations for a proposed combination with rival PetroReconcavo to review the new bid.

In January this year, Sweden-based Maha Energy bought a 5% stake in Brazilian oil company 3R Petroleum and proposed a carve-out of its onshore oil assets, which would later be merged with a third entity called PetroReconcavo.