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Petrobras Starts Production in Libra Field of Santos Basin

Zacks Equity Research
Updated

Petróleo Brasileiro S.A. or Petrobras PBR and its partners have initiated oil production in the Libra block of Santos Basin. The offshore oil field is located 200 kilometers south of Rio de Janeiro. The Libra field — one of the biggest pre-salt oil fields in Brazil — was discovered in 2010 and has recoverable oil resources in the range of 7.9-15 billion barrels.

The Brazilian state-run integrated energy company reported that production was initiated through the Pioneer of Libra floating production, storage and offloading (FPSO) unit in the pre-salt of Santos Basin. The FPSO vessel is the company's first unit capable of reinjecting all the gas produced during the tests that will induce the flow of crude oil. The unit has a processing capacity of 50,000 barrels of oil and 4 million cubic meters of gas per day. It will perform extended well tests and early production systems, to reduce reservoir risks for Petrobras in the location. In one year the production test is expected to gauge and gather more information regarding the deposit’s characteristic.

The vessel will be moved to other wells in the Libra block to operate early production systems after the completion of the first test. The data gathered by the FPSO unit will help the company during the development and optimization of subsequent production units, which will be installed later. 12 wells have been drilled in the block so far. Per Total S.A. TOT, a partner of Petrobras in the field, the technical cost of production in the field is estimated at around $20 per barrel. Another FPSO vessel with 150,000 barrels per day capacity is expected to be deployed in the field after the final decision.

The operations in the field are led by Petrobras holding a 40% interest. Royal Dutch Shell plc RDS.A, Total, CNOOC Limited CEO and China National Petroleum Corporation own 20%, 20%, 10% and 10% interests in the Libra Consortium, respectively. The state-run company Pré-Sal Petróleo SA is involved in the Production Sharing Agreement with the consortium.

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Brazil has huge oil reservoirs that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. These reserves, estimated to hold 50 billion barrels, are widely thought to be the most important oil finds in recent years. Petrobras is the operator in most of these exploration areas, and holds interests in the range of 20-100%.

Price Performance

There has been no movement  in Petrobras’ shares price year to date compared with the industry’s rally of 8%.

 

 

About Petrobras & Zacks Rank

Petrobras, headquartered in Rio de Janeiro,  is the largest integrated energy firm in Brazil and one of the largest companies in Latin America. The company’s activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks, as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons. It is also involved in other energy-related activities.

Petrobras reduced its five-year capital budget for the 2017–21 period by nearly 25% or $24.3 billion to $74.1 billion. The company projected capital budget of $98.4 billion at the beginning of this year. Notably, the previous estimate was lower than $130.3 billion declared in 2015. We believe that this spending cut will help the company clear debts to a certain extent as it still carries a net debt of more than $88 billion, with net debt-to-capitalization ratio of approximately 51%. As such, leverage is a primary concern for the firm.

Petrobras carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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