Pedro Medeiros, a Leading Analyst at Citigroup Investment Research & Analysis Covering Latin American Oil & Gas Stocks: Brazil's Pre-Salt Oil Discoveries Create a New Long Term Energy Source

Wall Street Transcript

67 WALL STREET, New York - February 12, 2014 - The Wall Street Transcript has just published its Oil & Gas: Exploration & Production Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Oil Price Expectations - Shale, Offshore and Deepwater Drilling - Unconventional Resources - Domestic Crude Prices - Capital Expenditures and Consolidation Activity - Frontier Exploration and Development - Offshore Deepwater Oil Discoveries - Offshore Capex Growth

Companies include: Gran Tierra Energy, Inc. (GTE), Petrobras Energ?a Participacio (PZE), Petroleo Brasileiro (PBR), Exxon Mobil Corp. (XOM), ConocoPhillips (COP), Ecopetrol SA (EC)

In the following excerpt from the Oil & Gas: Exploration & Production Report, an expert analyst discusses the outlook for the sector for investors:

TWST: How do you define your coverage in the oil and gas space before we get into all the details?

Mr. Medeiros: We cover the oil service stocks, E&P, integrated and petrochemicals.

TWST: How are the lower oil prices impacting the space?

Mr. Medeiros: Prices are a very big part of what is happening in the space. Investors are always chasing changes, and they are always trying to anticipate changes. Commodity prices make for the most relevant driver of revenues and profitability for all of these companies. If you want the particular impact of oil prices to the overall sector, it has various impacts, be it to companies' potential value, earnings or risk perception to balance sheets.

I would say the most impacted names in Latin America from lower oil prices would be number one, exploration stocks. The basket of those stocks includes Pacific Rubiales (PRE.TO), QGEP (QGEP3.SA), Canacol (CNE.TO), GranTierra (GTE) and other smaller stocks in Brazil. To a certain extent, Petrobras (PBR) is a slightly different case because the company is almost fully integrated, so a drop in oil prices does not necessarily mean a significant drop to profitability, because we would need to see similar weakening of oil products prices specifically in Brazil. That's a tricky point when we look at Petrobras, because the company had been following a policy or the lack of a policy for oil product prices in its main domestic markets. It is questionable whether the company would reduce fuel prices in light of lower crude price.

TWST: In Mexico there is a lot of talk about the privatization of the oil industry. In your opinion, is that a significant development?

Mr. Medeiros: Speaking for the perspectives of oil prices, the privatization of the oil industry in Mexico is a meaningful event to long-term global production supply and demand. As far as Latin America stock investment thesis go, I would say it's quite neutral in the short term. However, it is fair to consider that over time, if you think of a three to five years time horizon...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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