Brazilian oil giant Petroleo Brasileiro S.A. or Petrobras (PBR) announced the discovery of an oil and gas reserve in the Sergipe-Alagoas sedimentary basin, off the coast of northeast Brazil.
Located at a water depth of 2,341 meters, the discovery was made in the exploration well 1-BRSA-851-SES (1-SES-158), known as Barra. The well is situated on Block SEAL-M-426 in the BM-SEAL-11 concession and wireline logging and fluid sampling from a lined well formation test was performed to confirm the find.
Petrobras stated that the hydrocarbon accumulation, located at depths between 5,050 and 5,400 meters, exhibits superior porosity. Oil samples from the well indicate high-quality crude measuring 45-degrees API in the superior interval and 32-degrees API in the inferior interval.
State-controlled Petrobras controls 60% interest of the block and acts as the operator. The remaining 40% is held by IBV Brasil — a 50:50 joint venture company of Videocon Energy Brazil Ltd and Bharat Petroleum Corp Ltd’s subsidiary Bharat PetroResources Ltd.
Headquartered in Rio de Janeiro, Petrobras primarily engages in exploration, exploitation and production of oil from reservoir wells, shale and other rocks; in refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons; as well as in other energy-related activities.
We believe that Petrobras’ knowledge and proficiency in deep-water oil and gas exploration is reflected in its exceptional track record for hydrocarbon production growth. The company’s recent discoveries include the Tupi field (discovered in 2006 and now renamed Lula) with 5–8 billion barrels of recoverable reserves and the Lara field (discovered in 2008) with another 3–4 billion barrels, along with other finds like the Caramba field, the Carioca field and the Guara field.
However, we remain apprehensive about the company’s huge investment requirements, operational hindrances, international business risks and stiff competition from peers, such as BP Plc (BP) and Royal Dutch Shell plc (RDS.A). Unpredictable energy prices and government regulations also add to the negative sentiment.
Hence, we are maintaining our long-term Neutral recommendation on the stock.
