Weekly Oil & Gas Notes: Petrobras’ Production Update And Chevron’s Deepwater Projects In Indonesia

Oil and gas stocks continued their decline last week amid falling benchmark crude oil prices due to slowing demand growth. The growth in demand for crude oil has been slowing down recently due to moderating economic growth in emerging markets such as China and India and signs of slower economic recovery in the Euro-zone. Earlier last week, the International Energy Agency (IEA) in its latest monthly report cut its forecast for the growth in global oil demand this year. It now expects demand, which stood at around 90.5 million barrels per day last year, to increase by just around 0.7 million barrels per day this year. The price of front-month Brent crude oil futures contract on the ICE declined by around 4.5% last week and is currently trading at around $86/barrel. The NYSE Arca Oil & Gas Index (^XOI) also declined by around 1.8% last week.

Below, we provide an update on some of the key events that occurred last week related to the oil and gas companies we cover.

Petrobras’ Upstream Production On The Rise

Petroleo Brasileiro Petrobras (NYSE:PBR) recently announced its September 2014 hydrocarbon production figures. The company’s total oil and gas production from Brazil increased to 2,565 thousand barrels of oil equivalent per day (MBOED), up more than 8.5% over last year. Its domestic crude oil production grew by 7% from 1,979 thousand barrels per day (MBD) last year to 2,117.6 MBD this year. The month-on-month growth in crude oil production from Brazil stood at 0.6%. Most of the increase in hydrocarbon production primarily came from the ramp up of P-55 and P-62 platforms at the Roncador field located in the offshore Campos Basin that holds more than two-thirds of the company’s total proved hydrocarbon reserves in Brazil. ^[1]

Petrobras also announced the start-up of commercial production from a new platform at the Santos Basin pre-salt area of Iracema Sul, in Lula field, located on the block BM-S-11. Petrobras holds a 65% operating interest in the BM-S-11 concession, while BG Group and Petrogal holds a 25% and 10% interest in the block, respectively. The new platform, which is located around 240 km off the coast of Brazil, has a capacity to process up to 150 thousand barrels of oil and 8 million cubic meters of natural gas per day. This start-up is expected to provide a further boost to Petrobras’ pre-salt production. The company recently announced that oil production from fields operated by it in the pre-salt areas of Campos and Santos Basins, which averaged just 302 MBD last year, hit a record level of 618 MBD on September 18. ^[2]

• We currently have a $21/share price estimate for Petrobras, which is around 40% above its current market price. The company’s share price decreased by around 4.5% last week.
• We currently estimate Petrobras’ 2014 diluted EPS to be at $2.1, compared to the consensus estimate of $1.61 reported by Reuters.

See Our Complete Analysis For Petroleo Brasileiro Petrobras

Chevron Acts On Deepwater Projects In Indonesia

Chevron (NYSE:CVX) recently made a final investment decision (FID) on a deepwater natural gas development project in Indonesia after it received all required government approvals. The company holds a 62% operating interest in the Bangka project that includes a subsea tieback to the West Seno floating production unit (FPU), with a design capacity of a 115 million cubic feet of natural gas and 40,000 barrels of condensate per day. The Bangka project is a part of Chevron’s Indonesia Deepwater Development (IDD) plan, which also includes the Gendalo-Gehem project. The Gendalo-Gehem project that includes the development of two separate hubs (each with its own FPU and pipelines) at an estimated cost of around $4 to $7 billion was also expected to reach FID this year. However, Chevron is reported to have delayed the final decision on this project, as it found additional reserves in the targeted fields that led it to revise the development plan for the multi-billion dollar project. The immediate financial impact of this announcement on the company is limited since it takes several years for deepwater projects to advance from FID to first commercial production. ^[3]

• We currently have a $126/share price estimate for Chevron, which is around 10% above its current market price. The company’s share price decreased by around 1.8% last week.
• We currently estimate Chevron’s 2014 Non-GAAP diluted EPS to be at $11.02, compared to the consensus estimate of $10.35 reported by Reuters.

See Our Complete Analysis For Chevron

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

1. Petrobras total production in September, investidorpetrobras.com [↩]
2. Petrobras begins commercial production at Santos Basin pre-salt Iracema Sul area, investidorpetrobras.com [↩]
3. Chevron’s Indonesia Deepwater Natural Gas Project to Face Delay, bloomberg.com [↩]