Petróleo Brasileiro S.A., or Petrobras (ticker: PBR), is the state-run oil company of Brazil and has operations in 24 countries across five continents. It is the largest producer in South America and participates in E&P, refining, trade, transportation, petrochemicals, oil distribution, electricity, biofuels, and sources of renewable energy. PBR celebrated its 60th anniversary on October 3, 2013.
Petrobras’ proven reserves in the pre-salt grew by 43% in 2013 compared to 2012’s reserves, according to a company news release on January 15, 2014. The pre-salt currently accounts for more than 25% of PBR’s proven reserves and stretches from southern Espirito Santo state to Santa Catarina state. The company attributed the performance of platforms in the Campos and Santos Basins, along with the drilling of 42 wells, as the reason for reserve growth.
A new daily production record of 390 MBOPD was set on January 14, 2014, after a second production platform at Lula field went online and contributed 28 MBOPD (58 MBOPD total for the platform). The Santos Basin produces approximately 51% of the company’s total pre-salt production, with nine wells each contributing roughly 25 MBOPD. PBR notes the return is much higher than average well rates in the North Sea (15 MBOPD) and the Gulf of Mexico (10 MBOPD).
The pre-salt fields have produced more than 290 MMBOE since first being exploited in 2008. Hydrocarbons in three different pre-salt areas were discovered in December 2013 after extensions of the Campos Basin were realized in the same year. PBR’s wells in 2013 were drilled with a 100% success rate.
The company anticipates interconnecting 17 new wells to existing Santos platforms in 2014. Two new platforms in the area will go online in 2H’14 and five wells will be interconnected, adding 300 MBOPD in installed capacity. In all, 22 new production wells will be added to PBR’s fleet in the upcoming year.
Pre-Salt Production Stepping Up
Production from the pre-salt region has risen 16% since September 2, 2013, when production was 337 MBOPD. The production increase, along with numerous hydrocarbon discoveries in the current quarter, led to a 0.8% yearly jump in 2013 proved reserves (increase of 0.985 billion BOE). Roughly 1.14 billion BOE were added through exploration while roughly 0.16 billion BOE of assets were divested. The current total of reserves is roughly 16.56 total billion BOE and PBR’s operations based in its home country of Brazil make up approximately 96% of all production.
Discoveries and Sales in the Current Quarter
An extension well in block BM-SEAL 10 (100% working interest) confirmed the existence of hydrocarbons on December 18, 2013. The area is a part of the Sergipe field, which PBR believes may hold more than 1 billion recoverable barrels of resources. A Brazilian government official believes the Sergipe is the best area in terms of perspective after the subsalt. The unconfirmed estimates are based on results from at least 10 discoveries in seven wells since June 2011.
On November 12, 2013, PBR completed its fifth exploratory well in the Santos Basin pre-salt on block BM-S-11 (65% WI). The test revealed a hydrocarbon column more than 1,000 feet long.
A platform was placed online in the Papa Terra field (62.5% WI) on November 11, 2013, and will be connected to 16 total wells (five for production, 11 for injection). A nearby platform will be connected to 13 production wells, totaling 18 total producing wells in the region. The infrastructure will be assisted by a Floating Production Storage and Offloading platform with a processing capacity of 140 MBOPD.
Another platform was placed online in the Roncador field of the Campos Basin and will be connected to 17 wells (11 production and six injection). The semi-submersible platform can process 180 MBOPD and, with an area of 10,000 square meters, is one of the largest of its kind in the world. Two other platforms are already in operation in the play and another is currently being towed to the location.
The Libra Basin (40% WI), which is expected to hold between eight billion BOE and 12 billion BOE, is expected to yield its testing results in 2017. PBR reached a 35-year production sharing contract with four other operators in October. Per the agreement, each company is required to pay a $6.9 billion signing fee and pledge 41.65% of their profit oil to the Brazilian government.
The company also made progress on its company plan to divest $9.9 billion in assets by year-end 2017. Its properties in Peru were sold on November 13, 2013, to China National Petroleum Corporation for $2.6 billion. The area produced 16 MBOEPD and included interests in two other non-producing fields. PBR also completed the sale of its 35% stake in the BC-10 block, located in the Campos Basin, to ONGC Videsh and Shell (ticker: RDS.B). PBR acquired a total of $1.64 billion from the sale upon its completion on December 30, 2013, forfeiting 8.8 MBOEPD.
Total proceeds from the divestments were roughly $4.24 billion. Other potential sales include its properties in Africa and the Gulf of Mexico, according to the PBR site.
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