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Petrobras' FPSO Starts Up

Zacks Equity Research

Brazil's state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR) has confirmed the startup of its floating production storage and offloading (“FPSO”) vessel in the Santos Basin to extract oil and gas from the deepwater Lula Nordeste pre-salt project.

The Cidade de Paraty FPSO – one of the goals set for this year as per Petrobras’ 2013-2017 business plan – lies 2,120 meters deep in water, around 300 kilometers from the coastline. The platform has a production capacity of 120,000 barrels of oil per day and 5 million cubic meters of natural gas per day.       

FPSO vessels – unlike most offshore producing platforms that take out the oil and gas from the depths of the ocean and transport it onto land through a pipeline – collect the oil, store it in onboard tanks and offload it to tanker shuttles that take the oil to shore.

This helps the oil companies (like Petrobras) to not only keep pushing their offshore limits but also to move their expensive facilities to safety in case of a hurricane or tropical storm. The use of FPSOs is widespread in offshore Brazil and West Africa.

7-LL-11-RJS, the first well from the Petrobras-operated Lula Nordeste field to be tied to the Cidade de Paraty platform, can churn out a maximum of 25,000 barrels of oil per day though output will be confined to 13,000 barrels per day during the first month and increased gradually as the systems are put in place.   

Following 7-LL-11-RJS, the FPSO will be connected to seven more production wells and six injection wells in the near future, with peak output likely to be achieved anytime during the second half of next year.   

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company’s activities include: the exploration, exploitation and production of oil from reservoir wells, shale and other rocks, and in the refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

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.       

Meanwhile, one can look at Newpark Resources Inc. (NR), Exterran Partners L.P. (EXLP) and Dawson Geophysical Co. (DWSN) as good buying opportunities. These energy equipment service providers – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories with potential to rise significantly from current levels.

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