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$25.07 -7.52 (-23.07%)
10/15/2008 4:02 PM

Petroleo Brasileiro S.A. (ADR) (PBR)

CAPS Rating:
*****

The national oil company of Brazil and directly or through its subsidiaries is engaged in the exploration, production, refining, distribution, import, export, marketing and transportation of hydrocarbons and oil products.

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Avatar NtscrbEnergy (85.55) Submitted: 12/18/06 8:35 AM : Outperform Start Price: $24.54 PBR Score: 39.02

Petroleo Brasileiro SA (PBR) is the largest company in Brazil operating as an integrated oil and gas company with operations in upstream, midstream and downstream segments. The company has proven reserves of approximately 11.77 billion barrels of oil equivalent (BOE) and pumps an average 2.22 million BOE per day.

The company has worldwide proven reserves to production ratio of 15.4 years, which is higher than the industry average. This places it in a secure position as its reserves are sufficient to support production for a long time. PBR's strategy is to expand its operations in the entire South American market. Further, the company has plenteous experience operating offshore where a majority of its reserves are located. With the worldwide drilling locations moving to more complex locations, PBR expansion will yield good returns. This is assumed on the basis of its past experience in working in complex locations.

Approximately 90% of PBR’s reserves are located in Brazil, and due to local government intervention, it is sometimes forced to sell products below international market prices. This is because 32% of its shares and 55.7% voting rights are with the Brazilian government. If this situation of compelling PBR to sell at lower prices persists, it would be difficult for it to recover costs. In addition, the government has hit the company hard by increasing foreign competition and allowing foreign companies to export oil, which fetches them good prices in the international arena.

The company is largely dependent on the global demand for oil and gas, which has a direct impact on its top-line. With the increase in demand from energy hungry India and China, prices will be at higher levels in the recent future. Endorsing the strong fundamentals, the stock price has adequate scope to nurture.

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Avatar NtscrbEnergy (85.55) Submitted: 6/06/07 2:48 AM

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Petrobras, which produces oil and natural gas, discovered saturated light oil reserves with excellent productivity, located under a thick salt layer along the Esprito Santo coastline. This discovery has extended the productive horizon of the Caxaru Basin and also, the company installed FPSO Cidade do Rio de Janeiro in the Espadarte Field in the Campos Basin, which has a daily production capacity of up to 100 thousand barrels of oil and 2.5 million cubic meters of natural gas. On the international front, the company initiated production from two wells in the Cottonwood field, in the Gulf of Mexico which gives a daily output of 25 thousand barrels of oil. These new platforms will help the company to fulfill their key strategy of continuing to expand their production.

In the latest quarterly results, the company reported a 7% increase in revenues and net income went down by 38% due to greater pressure from costs. Total production of petroleum, LNG and natural gas came to 2,305,000 equivalent barrels a day, 1.1% higher than in 1Q06. Outlook for 2007 is positive due to the expectation of rising oil prices.

Outlook for the oil industry is positive. Brent crude prices are currently hovering around $70/bbl and global oil demand is rising, creating immense growth prospects for the company and considering these positive factors and different discoveries by the company, it is expected that Petrobras will give good performance in the future.

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