Petrobras’ Upstream Production In Brazil Rises Sharply On Increased Development
Petrobras (NYSE:PBR) recently announced its December 2014 hydrocarbon production figures. The company’s total oil and gas production in Brazil increased to 2,675 thousand barrels of oil equivalent per day (MBOED), up more than 13% over December 2013. Its domestic crude oil production grew by 12.6% from 1,963.9 thousand barrels per day (MBD) in December 2013 to hit an all-time high of 2,212.2 MBD last year. The month-on-month growth in domestic crude oil production stood at 4.8%. Most of the increase in hydrocarbon production came from the start-up of two new production systems: Cidade de Ilhabela at the Sapinhoá field and Cidade de Mangaratiba in Iracema Sul area at the Lula field. Both the fields are located in the pre-salt layer of the Santos Basin that holds almost 23% of the company’s total proved oil and gas reserves in Brazil. [1]
Petrobras is a vertically integrated oil and gas company, which operates in both the upstream and downstream segments of the industry. The Brazilian multinational energy giant is one of the largest companies in Latin America by annual sales revenue. Its operations account for a large majority of the total oil and gas production in Brazil. In 2013, Petrobras’ average daily oil production in Brazil was 1,931.4 thousand barrels per day (MBD), an estimated 90.9% of Brazil’s total oil production. We currently have a $13/share price estimate for Petrobras, which values it at almost 9x our 2014 diluted EPS estimate of $1.45 for the company.
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Oil and Gas Production In Brazil On The Rise
Petrobras’ total oil and gas production in Brazil rose sharply last year. With a 5.3% y-o-y increase in crude oil and natural gas liquids production, the company’s total hydrocarbon production in Brazil increased by 6% over 2013. The growth in production was mostly driven by the increased pace of development of its hydrocarbon reserves. In addition to starting up production from several new floating platforms, Petrobras also brought up 82 new wells in 2014 (that were tied to existing platforms), compared to just 47 wells in 2013. The sharp increase in the number of interconnected wells brought online last year was primarily due to the progressive addition of pipe laying vessels (that support the interconnection of oil wells) by the company. [1]
Going forward, Petrobras’ upstream production is expected to grow significantly as it continues to develop its pre-salt reserves. Between 2014 and 2018, Petrobras plans to invest $153.9 billion in the exploration and production of hydrocarbons in Brazil. It plans to invest a lion’s share of this amount ($112.5 billion or 73%) in the development of existing proved reserves, with more than 64% of that going into the development of pre-salt reserves. Currently, production from pre-salt reserves accounts for just around 30% of Petrobras’ total oil production, but the company plans to increase this figure to 53% by 2020. Petrobras recently announced that oil production from fields operated by it in the pre-salt areas of the Campos and Santos Basins, which averaged just 302 MBD in 2013, hit a record level of 713 MBD on December 21st, 2014. [1]
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Notes:- December Oil and Gas Production, investidorpetrobras.com [↩] [↩] [↩]