Brazilian oil giant Petroleo Brasileiro S.A. or Petrobras (PBR) announced the discovery of two levels of high-quality crude oil at a well in the country’s ultra deepwater pre-salt Campos Basin.
Apart from Petrobras, which has a 30% interest in the 1-REPF-11A-RJS well (informally known as Gavea), Norwegian company Statoil ASA (STO) holds a 35% stake. The remaining interest is controlled by operator Repsol Sinopec –– a partnership between Spain's Repsol-YPF and China’s state controlled China Petroleum & Chemical Corporation or Sinopec (SNP).
Located 120 miles off the coast of Rio de Janeiro state, Gavea was drilled to a water depth of 8,880 feet and reached a final depth of 22,460 feet. The consortium told Brazilian authorities about the presence of hydrocarbons traces in the first level of Gavea well in March and regarding the second one in April.
The consortium commented that the find in the Gavea exploration well is one of the most notable discoveries made in the basin and is reviewing the results of the well, before advancing with further operations in the area.
Repsol Sinopec –– formed last October –– is engaged in exploration and production activities for projects in Brazil. The partnership has maximum exploration rights in 16 blocks in Santos, Campos, and Espirito Santo basins and acts as operator in 6 of them.
We believe that economic growth in Brazil coupled with various development projects and joint ventures will boost Petrobras’ medium-term earnings outlook. Additionally, we expect the company to benefit from its expertise in deep-water operations, recent discoveries and the emergent domestic refined products market.
However, we maintain a long-term Neutral rating on the stock, considering the volatile macro backdrop, operational hindrances and the company’s huge investment requirements.
PETROBRAS-ADR C (PBR): Free Stock Analysis Report
CHINA PETRO&CHM (SNP): Free Stock Analysis Report
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