Petrobras Reserves Rise Slightly

Zacks

Brazilian state-run energy giant Petroleo Brasileiro S.A., or Petrobras (PBR) announced that its proven oil and gas reserves for 2012 has increased by 0.1% as compared to 1% growth on 2011. According to the criteria of the U.S. Securities and Exchange Commission, by the end of 2012, the company’s crude reserves have reached 12.884 billion barrels of oil and natural gas equivalent (boe) whereas reserves were 12.873 billion boe for 2011.  

Management said that for the year 2012, 0.896 billion boe were assigned as proved reserves as it can be recoverable, of which 0.884 billion boe were used up, concluding an addition of 0.011 billion boe to the total reserves of 2011.

The slight upside in reserves for 2012 have stemmed from the new discoveries in Brazil and in the Gulf of Mexico, which were much smaller than the huge findings in Santos and Campos basins of Brazil during the previous year.

Headquartered in Rio de Janeiro, Petrobras is one of the biggest energy companies in the world along with ExxonMobil Corp. (XOM), Royal Dutch Shell plc (RDS.A) and Chevron Corporation (CVX).  

Petrobras was incorporated in October 1953 to conduct the Brazilian government’s hydrocarbon activities, which currently holds a 48% stake (and 63% voting share) in the company. The company operates in six segments: ‘Exploration and Production,’ ‘Refining, Transportation and Marketing,’ ‘Distribution,’ ‘Gas and Power,’ ‘Biofuels’ and ‘International.’

Petrobras currently retains 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.

According to the CIA World Factbook, Brazil holds 15th place in the world in terms of total oil and gas reserves. Moreover, Brazil is expected to be among the world’s four largest oil producers this decade, due to the country’s huge offshore crude discoveries. Hence it is expected that the company can strengthen its operations from the new discoveries and can grow its earnings significantly in the near future.

On the flip side, Petrobras’ results are heavily levered to changes in the overall energy price environment, which are inherently volatile and subject to complex market forces. Brazilian politics and economics and changes to the country’s energy legislation may have important effects on the company.

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