Brazilian oil giant Petroleo Brasileiro S.A. or Petrobras (PBR) had encountered high quality oil in a well drilled in the pre-salt deposit of Santos Basin, offshore Brazil.
Located at the southern portion of Sapinhoa Field, the well – 1-BRSA-1045-SPS (1-SPS-96) – was drilled to a water depth of 7,224.4 feet and is 198.8 miles off the coast of the State of Sao Paulo.
With the use of cable tests, the existence of 27? API oil was confirmed from carbonate reservoirs below the salt layer. To calculate the lower extent of the reservoir, the well has been drilled to a depth of 16,594.5 feet. Petrobras plans to carry on additional exploration in the well to evaluate the potential of the find.
This is the third well explored in the Transfer of Rights area that covers an acreage known as Sul de Guara. Petrobras is permitted to generate up to 319 million barrels of oil equivalent from the region.
In 2010, Petrobras entered into the Transfer of Rights Agreement with Brazilian National Oil, Natural Gas and Biofuels Agency and obtained the authority to explore the region. Under this assignment, Petrobras drilled the first well, 3-BRSA-944-RJS (3-RJS-688A), in the Franco area, while the second was explored in the pre-salt region named Tupi Northeast that lies to the northeast of Lula Field.
We maintain a long-term Neutral recommendation on Petrobras. The stock, which operates with other global energy players such as ExxonMobil Corp. (XOM), PetroChina Co. Ltd. (PTR) and Royal Dutch Shell plc (RDS.A), currently, retains a Zacks #3 Rank that translates into a short-term Hold rating.
We remain optimistic on the medium- to long-term outlook on Petrobras based on its encouraging portfolio of investments, in particular in the prolific Espirito Santo, Campos and Santos basins of Brazil. The company is the operator in most of these exploration areas in which it holds interests ranging from 20% to 100%.
However, we remain on the sidelines given the company’s exposure to the volatile oil and gas fundamentals, which are expected to impact profitability. Moreover, Petrobras’ huge investment requirements, operational hindrances and international business risks also add to our negative sentiment.
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