Petróleo Brasileiro S.A. (aka Petrobas or PBR), a Brazilian state-owned oil company, expects to hit monthly and fiscal all-time high oil production levels for December as well as full-year 2010. A significant contribution from the Campos Basin is the primary reason behind this solid expectation.
The company expects December production to reach roughly 2,120 thousand barrels per day (Mbpd). The previous record was set in April last year at 2,033 Mbpd. Petrobas also pointed out that upon confirmation, the production volume for the last month of the year will be 6.7% higher than December 2009 and 4.4% higher than November 2010 (which reached 2,030 Mbpd).
The Rio de Janeiro based company also anticipates that it will close 2010 with a record production level of more than 2 million barrels per day (2,003 Mbpd). The five new wells in the Campos basin are expected to add more than 100 Mbpd to the company’s output in Brazil.
The five new wells include the following: CHT-9 (in the Cachalote field) and BFR-3 (Baleia), both connected to FPSO Capixaba; wells JUB-9 and JUB-14 (in the Jubarte field), connected to the recently installed P-57; and finally CRT-43 (in the Caratinga field), a well connected to P-48, which produces from the pre-salt layer of the field.
Additionally, Petrobras stated that production from mature fields in the North, Northeast and Espirito Santo also contributed to the results. These areas posted stable production of 213 Mbpd during 2010. Importantly, the start-up of operations at well SPS-55, which recently kicked off the Long Term Testing at Guará, in the pre-salt layer of the Santos Basin, also added to the performance.
Separately, Petrobas declared that the pre-salt reservoirs of the Tupi and Iracema areas in Santos Basin are commercially viable, holding 8.3 billion barrels of recoverable reserves. With huge pre-salt reservoirs (oil deposits located in the sea bed under thick layers of salt) below the Espirito Santo, Campos and Santos Basins in deep and ultra-deep water, Brazil is estimated to hold 50 billion barrels. In most of these exploration areas, Petrobras remains the operator with interests ranging from 20% to 100%.
Petrobras, the third-biggest oil company in the world by market value behind ExxonMobil Corp. (XOM) and PetroChina Co. Ltd. (PTR) and the largest integrated energy firm in Brazil, stands to benefit from the country’s economic growth and huge pre-salt oil reserves. Given its strong pipeline of development projects and impressive exploration successes, Petrobras’ long-term outlook seems compelling.
However, our long-term Neutral recommendation reflects concerns regarding the company’s significant increase in the level of its downstream investment in the face of a bearish refining margin outlook. Petrobas holds a Zacks #3 Rank, which is equivalent to a short-term ‘Hold’ rating.
PETROBRAS-ADR C (PBR): Free Stock Analysis Report
PETROCHINA ADR (PTR): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
Zacks Investment Research
