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Petrobras Confirms Moita Bonita Find

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Brazilian state-run energy giant, Petroleo Brasileiro SA, or Petrobras (PBR) has confirmed the presence of gas and light oil in the extension well, 3-BRSA-1194-SES, commonly known as Moita Bonita -1.

The ultra-deepwater well is located in the Sergipe-Alagoas Basin, in the Moita Bonita area, in the state of Sergipe. It is located 7 km from 1-BRSA-1088-SES or the Moita Bonita discovery well at a water depth of 2,800 meters on the concession BM-SEAL-10.  

Petrobras has a 100% holding in BM-SEAL-10 and also acts as its operator. The company also has interest in the BM-SEAL-4 along with partner ONGC. Both these concessions have received approval for the discovery evaluation plan by the National Agency of Petroleum, Natural Gas and Biofuels (:ANP).

A day earlier, Petrobras announced an oil discovery on the concession BM-POT-17, in Rio Grande do Norte. It is the first of its kind in the deep waters of the Potiguar Basin. The well – also known as Pitu – is in water depth of 1,731 meters.

Earlier in the month, Petrobras announced an increase of 4% in gasoline price and 8% in diesel price. This new policy will lead to automatic adjustment in domestic gasoline and diesel prices, which should benefit the company. We are also encouraged by the recent increase in pump fuel prices that is expected to boost Petrobras’ margins.

However, we remain concerned by the company’s declining production trend. The huge investment requirement and the possibility of heightened state interference add to the negative sentiment.

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 such as Abraxas Petroleum Corp. (AXAS), Harvest Natural Resources Inc. (HNR) and Clayton Williams Energy, Inc. (CWEI). All these currently sport a Zacks Rank #1 (Strong Buy).

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