Petrobras, Ecopetrol Permitted to Drill Following Court Ruling

The Colombian division of Petrobras S.A. PBR, Petrobras International Braspetro BV,and the country’s state-owned energy giant, Ecopetrol S.A. EC, have finally received a favorable ruling from the Santa Marta Tribunal to continue with drilling and operational activities in the Tayrona drilling area after a previous setback from the Fourth Labor Court of the Santa Marta Circuit. Previously, the labor court had ruled to halt operations at the Sirius-2 well due to issues raised by the Indigenous Community of Taganga. This reversal of order marks a noteworthy step as the project aims to address Colombia’s alarming natural gas shortage.

Court Decision Eases PBR, EC and Colombia’s Energy Future

PBR and EC had earlier estimated that the Guajira offshore basin had 6 trillion cubic feet (tcf) of natural gas reserves and the discovery could have important implications for the declining gas supply of Colombia. Petrobras will act as an operator in the project with a 44.44% stake, partnering with Ecopetrol, holding a 55.56% stake. Both companies are focused on determining the commercial viability of the project and are viewing it as a critical resource to meet Colombia’s future energy needs.

Indigenous Consultation

The tribunal has further instructed the Ministry of the Interior to reassess within one month if any formal consultation is required with the Indigenous communities. This step will take care of the demands of the local communities and meet the energy goals of the country at the same time. The court approval allows the companies to carry on their activities in the Tayrona area, but concerning the local communities and the environment.

PBR and EC’s Zacks Rank and Key Picks

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. As part of its diversification strategy, the company has been working on multiple projects in South Africa.

The Colombia-based petroleum company, Ecopetrol S.A., is focused on identifying opportunities within the eastern Llanos Basin of Colombia, as well as in other areas in Colombia and northern Peru.

Currently, both companies have a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Smart Sand, Inc. SND and Nine Energy Service, Inc. NINE.While Smart Sand currently sports a Zacks Rank #1 (Strong Buy), Nine Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Smart Sand produces northern white raw frac sand for the oil and gas industry. It offers proppant and related logistics services for oil and gas recovery from unconventional wells. SND’s expected EPS (earnings per share) growth rate for the next quarter is 125%, which compares favorably with the industry's growth rate of 13.68%.

Nine Energy Service, Inc. provides onshore completion and production services for unconventional oil and gas resource development. NINE’s expected EPS (earnings per share) growth rate for the next year is 35.77%, which compares favorably with the industry's growth rate of 19.80%.

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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.

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