How Will Petrobras’ Oil & Gas Production Move In The Next Five Years?
Petroleo Brasileiro Petrobras (NYSE:PBR) is an integrated energy company with the majority of its operations concentrated domestically in Brazil. Its exploration and production operations contribute nearly 25% of its total revenue and about 30% of its operating profits. The company reported daily domestic hydrocarbon production of roughly 2,600 thousand barrels in the June quarter of 2016. While the company had continued to grow its upstream production at a steady rate of around 2% over the last five years, the commodity downturn over the last two years has severely impacted its top line. For instance, Petrobras’ exploration and production revenue dropped almost 50% in 2015, due to weak price realizations on the back of plummeting commodity prices during the year.
Based on the volatility in commodity prices and the current market trends, we expect Petrobras to slow down its hydrocarbon production growth over the near term due to lower price realizations of commodities. However, the pace of growth could vary depending upon the recovery in commodity markets over the next few quarters.
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