Brazilian state-run energy giant, Petroleo Brasileiro SA, or Petrobras (PBR) was the dominating bidder in the auction organized by Brazil's National Petroleum Agency, or ANP, acquiring 49 out of the 72 oil and natural gas blocks that received bids.
The 49 blocks that the company won was one less than what it bid for. Among the blocks won by Petrobras in this 12th bidding round of ANP, 22 were in partnership, 16 of which will be operated by Petrobras and the remaining by its partners.
The total signature bonus to be paid by the company is around R$143 million, which amounts to 87% of the total bonus collected in the round. The consideration comprises R$120 million to be paid by Petrobras and the remaining R$ 23 million to be paid by partners.
The blocks that were put up for auction are located in remote areas that are yet to be explored or in mature regions, that have already produced oil and may not have much more to offer. As a result, the 240 blocks put up for the auction received lukewarm response. Out of the 21 companies registered to participate in the bid, only a handful of oil majors like Petrobras, Royal Dutch Shell (RDS.A) and Total S.A. (TOT) were visible.
The bid by Petrobras, however, is a move to increase acreage near its existing operations, facilitating growth in production and reserves. In the mature areas, the company has acquired 19 blocks in the Sergipe-Alagoas basin and 20 blocks in the Recôncavo basin, near its existing facilities. In the new frontier basins, it has acquired 1 block in the Acre-Madre de Dios basin and 9 blocks in the Paraná basin, with the objective of locating new natural gas focused producing areas.
This investment is in line with the company’s exploration plan as per the Business and Management Plan 2013–2017.
Headquartered in Rio de Janeiro, Petrobras currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked energy sector stocks like Matador Resources (MTDR) that currently sports a Zacks Rank #1 (Strong Buy).