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Brazil's Petrobras Confirms More Find in Moita Bonita Area - Analyst Blog

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Brazilian state-run energy giant, Petroleo Brasileiro S.A., or Petrobras ( PBR ) has confirmed the presence of gas and light oil in the second extension well, 3-BRSA-1244-SES / 3-SES-182, commonly known as Moita Bonita -3.

The ultra-deepwater well is located in the Sergipe-Alagoas Basin, in the Moita Bonita area, 82 kilometers off the coast of Sergipe. It lies around 5 kilometers from 1-BRSA-1088-SES or the Moita Bonita discovery well at a water depth of 2,790 meters on the concession BM-SEAL-10. Petrobras has a 100% holding in BM-SEAL-10 and also acts as its operator.

As per initial analysis, both oil and reservoir quality is good though additional studies will be required to evaluate volumes, extent and productivity of the find.

Brazil has huge oil/gas reservoirs that lie in deep and ultra-deep water. These reserves, estimated to hold 50 billion barrels, are widely thought to be the most important oil finds in recent years. Petrobras is the operator in most of these exploration areas, and holds interests ranging from 20% to 100%.

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil. The company's activities include: the exploration, exploitation and production of oil from reservoir wells, shale and other rocks, and in the refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

Continued demand growth in Brazil (expected to outperform developed countries in the next few years), together with all the new investments and acquisitions, will fuel Petrobras' medium-term earnings outlook. Additionally, the company is likely to benefit from its expertise in deep-water operations, its huge recent discoveries (which could double its resource base) and the growing domestic refined products market. Furthermore, with the Brazilian government allowing Petrobras to raise fuel prices, investors can expect the company to boost its margins and improve cash flows in the near future.

However, concerns remain on account of the company's declining production trend. The huge investment requirements and the possibility of heightened state interference add to the negative sentiment.

As a result, Petrobras currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players from the broader energy sector like Sanchez Energy Corp. ( SN ), Cheniere Energy Inc. ( LNG ) and GeoPark Ltd. ( GPRK ). All these stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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