Petrobras (PBR) Reaches 52-Week High on Recent Discoveries
Petroleo Brasileiro S.A. or Petrobras (PBR) ADRs hit a 52-week high of $19.32 on Aug 27, 2014. In fact, the Brazilian state-run energy giant has seen its stock price climb over 44% since the beginning of the year. The stock has been going strong following reports of recent oil discoveries.
What is Driving the Stock?
On Aug 26, Petrobras confirmed the presence of gas and light oil in the second extension well, Moita Bonita -3. As per initial analysis, both oil and reservoir quality is good.
Brazil has huge oil/gas reservoirs that lie 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 ranging from 20% to 100%.
Moreover, the company recently announced a fourth oil discovery in the Jupiter area in Block BM-S-24 in the Santos Basin. The exploration and development of its available resources should help the company to reach its target of ranking among the top five integrated oil firms in the world by 2030.
Moreover, Petrobras has signed an agreement with the Bolivian state owned petrol company, YPFB, to settle interpretation differences regarding the Bolivian natural gas supply agreement. Though the lumpsum settlement fee may have negative effect in the upcoming results, undisrupted natural gas supply from the Bolivian market and preferential rights to the natural gas Petrobras discovers in Bolivia would prove beneficial for the company in the long run.
Zacks Rank & Stocks to Consider
Currently, Petrobras carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months. As such, further upside potential from here may be limited.
Meanwhile, one can consider better-ranked players from the broader energy sector like Sunoco Logistics Partners L.P. (SXL), Patterson-UTI Energy Inc. (PTEN) and Cameron International Corporation (CAM). All these stocks sport a Zacks Rank #1 (Strong Buy).
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