Current PBR Stock Info

Petrobras (ticker: PBR) announced production for the month of September 2014 increased 0.8% compared to August 2014. Rates totaled 2,781 MBOEPD, up from the previous month’s volume of 2,759 MBOEPD. The increase comes despite a temporary interruption of 44 MBOPD in monthly average production for planned maintenance on platforms.

The growth in production was mainly influenced by the ramp up of platforms P-55 and P-62, at Roncador (Campos Basin), and of FPSO Cidade de Paraty, at Lula Nordeste (Santos Basin), the company said in a press release. In September, six new offshore wells started up in the Santos and Campos Basins, including five production wells and one injection, totaling 53 new wells this year.

Production from the pre-salt layer of the Santos and Campos Basins reached an average of 532 MBOPD in September. The operational area set a single day record of 618 MBOEPD on September 18. These two figures are up 19.8% and 39.2%, respectively, compared to totals from six months ago in April. Production from all operations is up 19.3% from March 2014.

Last week the company announced a gas find at Espírito Santo Basin post-salt, off the coast of the Espírito Santo state. The discovery took place during the drilling of well 3-BRSA-1259-ESS (ANP nomenclature) / 3-ESS-222 (Petrobras nomenclature), informally known as Tanganika, at a water depth of 1,043 meters, located in the Malombe Discovery Evaluation Plan (PAD), 72 km off the coast of the Espírito Santo state. The well had reached the total depth of 2,996 meters. The consortium operated by Petrobras (89.89%) in partnership with Repsol Sinopec (11.11%) will evaluate the discovery through a formation test.

petrobras-production-forecastElections Looming

Brazil’s hotly contested presidential race between Dilma Rousseff and Aecio Neves has piqued investor interest in PBR.

“Neves, the market favorite, has gained ground since his surprise result in the first-round vote on Oct. 5, when he bested environmentalist Marina Silva to place second behind Rousseff,” an article by Reuters said today. “Surveys by Brazil’s main polling firms Datafolha and Ibope show Rousseff and Neves running neck-and-neck in a race that is too close to call. … In the narrowest election in decades, Brazilians have to choose between re-electing a government that has lifted millions from poverty or switching to more business-friendly policies advocated by Neves to pull the country out recession,” the Reuters story said. A second round runoff election is scheduled for Oct. 26.

The ouster of Dilma Rousseff, the incumbent, would be of best interest to PBR shareholders, says a Raymond James note on October 7, 2014. The note reads:

“Under Rousseff’s administration, Petrobras has suffered painful deterioration in its balance sheet, with total debt soaring from $69 billion at year-end 2010 to $140 billion as of 2Q14. While some of this was inevitable – intensive capital spending on presalt projects – much of the financial travails have resulted from the government’s fuel price policy, i.e. requiring Petrobras to sell fuel at retail outlets at prices 10-15% below international benchmarks. As such, the downstream segment lost $12.5 billion in 2013 and is on track to lose at least $10 billion in 2014 – though the recent fall in oil prices is helping (while, of course, having the opposite effect on upstream earnings). This encumbrance explains the bulk of Petrobras’ cash flow outspending in recent years.”

Raymond James says victory by her opposition, Aecio Neves, would be most beneficial to PBR. His strong statements in the first presidential debate accused Rousseff of corruption with her handling of Petrobras. Raymond James says a victory by Neves would narrow the gap between international and domestic fuel prices by nearly half, resulting in a downstream loss of roughly $5 billion. “By itself, that is not enough to make Petrobras free cash flow positive, but at least incremental borrowing would be greatly reduced,” the note said.

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