Petroleo Brasileiro S.A. or Petrobras (PBR) announced the discovery of two new oil and gas fields in the Espirito Santo basin, netting three finds in the arena. Although the estimated size of the fields was not disclosed, they definitely strengthen Petrobras’ position in the deepwater region.
As per the Brazilian state-run company, the wells 1-BRSA-939-ESS and 1-BRSA-936D-ESS, named “Pe-de-moleque” and “Quindim,” respectively, are in the BM-ES-23 exploration block. These are located 71 miles from Vitoria, the capital of the southeastern state of Espirito Santo and at a water depth of about 1,900 meters.
Early last month, Petrobras confirmed the discovery of light oil in the Brigadeiro well in the same block. The company controls 65% operating interest in the block, while the other partners are the Brazilian unit of Royal Dutch Shell plc (RDS.A) holding 20% and Inpex Petroleo Santos Ltda with 15%.
Offshore southeast Brazil, the Espirito Santo basin is a promising new oil and natural gas frontier of the country that holds ample reserves of gas in shallow water, light and heavy oil in deepwater, and light oil in ultradeep water and onshore.
We maintain a long-term positive outlook on Petrobras owing to its encouraging portfolio of investments in the Espírito Santo basin. We believe that the company has infused a lot of capital and manpower to develop superior technologies for these infrastructure projects including pipelines, processing plants and a new port to support offshore operations.
However, the success of these projects remains uncertain and bears great financial risk given the company’s technologically complex, challenging and expensive exploration activities. Moreover, Petrobras faces strong competition from its peer ExxonMobil Corporation (XOM). We are maintaining our long-term Neutral rating on the stock.
Headquartered in Rio de Janeiro, Petrobras is involved 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.
