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MarketScreener Homepage  >  Equities  >  Bolsa de valores de Sao Paulo  >  Petróleo Brasileiro S.A. - Petrobras    PETR4   BRPETRACNPR6

PETRÓLEO BRASILEIRO S.A. - PETROBRAS

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Petrobras CEO Sees Auction of Pre-Salt Oil Blocks as Key to Growth

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10/18/2019 | 05:32pm EST

By Jeffrey T. Lewis

RIO DE JANEIRO -- The Brazilian government's auction next month of exploration blocks in the country's rich pre-salt offshore oil fields is fundamental to Petróleo Brasileiro SA's plans for growth, according to Chief Executive Officer Roberto Castello Branco.

Many of the world's biggest oil companies, including Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC and Petrobras are registered to participate in the sale, which is scheduled to take place here on Nov. 6.

Petrobras has been selling off less profitable and noncore production fields and other operations in an effort to focus on production. The company needs to invest in new fields to boost its reserves and increase output in coming years, Mr. Castello Branco said Friday.

"We need to add reserves to grow," the executive said, adding that the auctions are a unique opportunity to buy high-quality assets.

Interest in the fields among Petrobras's peers is higher than is typical for the sale of exploration rights, because the Brazilian company has been pumping oil from the deposits deep beneath the sea floor for a decade and shown them to be productive, analysts say.

"They're practically reserves, where the risks of exploration are very low. That makes this auction different," Mr. Castello Branco said.

Petrobras is currently in talks with potential consortium partners to bid together on the blocks, he said, declining to comment further the talks.

Petrobras signed a contract in 2010 with the Brazilian government to exploit the pre-salt fields -- so called because they lie under a two-kilometer-thick layer of salt deposits beneath the seabed -- that gave the company the right to pump 5 billion barrels of oil from the deposits.

The fields have since been estimated to hold up to 15 billion barrels of oil equivalent, and under the terms of the contract, the government has the right to sell the extra reserves.

The government is asking for a total of 106.6 billion reais ($25.9 billion) in signing bonuses from the winners of the auctions, with 34.6 billion reais of that amount going to Petrobras to compensate it for the decline in prices since the contract was signed.

Petrobras's long experience in the field makes the company the "natural owners" of the deposits, Mr. Castello Branco said in his office atop the company's 24-story headquarters with a view of Rio's Sugarloaf mountain.

"We discovered it, we developed it," he said. "We have the technology, we have the highly competent engineers" experienced in dealing with the difficulties of producing in the area.

Production from the fields is also more profitable than the company's output from other deposits and other businesses, such as refining, so it is better for Petrobras to dispose of them and boost output, Mr. Castello Branco said.

Petrobras is already in the process of selling off some of those operations, and has had strong interest from buyers in four refineries it recently put on sale, he said. Two of the refineries are in Brazil's south and two are in the northeast, and interest has come from major oil companies, smaller Brazilian companies and independent refiners.

Bidders on the four facilities will turn in nonbinding offers on Nov. 8, according to Mr. Castello Branco.

The company has already sold off all or part of other businesses, such as its gas-station operator Petrobras Distribuidora SA, and natural-gas pipeline operator Transportadora Associada de Gas SA, or TAG, as it concentrates on production.

Petrobras's previous investments in the pre-salt fields, which accounted for just over 60% of production in the third quarter, are already paying off. Total output jumped 9.3% in the period from the previous quarter, as new platforms came on line, and almost 15% from the third quarter of 2018.

But those rapid increases in production will slow in coming quarters and years, and will start to speed up again only when the fields the company buys at the auction next month come online three or four years from now, Mr. Castello Branco said.

Petrobras is working to reduce the time it takes for the company to start production in new fields, to three years from about five years currently, and to cut how long new platforms take to reach maximum output to nine months from about a year.

The company is also going after operating costs in its "relentless" drive to become more efficient, said Mr. Castello Branco. Petrobras's current goal is to cut $8 billion out of its operating costs over the five years from 2020 through 2024, but the CEO said he is raising that goal to $10 billion.

The oil producer has been offering employee buyouts, concentrating workers in fewer offices and even cutting the number of printers its workers use.

"Before, everyone in here used to have their own printer," he said, referring to Petrobras's headquarters. "Now we share them."

--Samantha Pearson contributed to this article.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BP PLC -0.37% 506.7 Delayed Quote.2.55%
EXXON MOBIL CORPORATION -0.61% 70.34 Delayed Quote.3.78%
LONDON BRENT OIL -0.21% 62.25 Delayed Quote.15.20%
PEARSON PLC -1.53% 695.2 Delayed Quote.-24.77%
PETRÓLEO BRASILEIRO S.A. - PETROBRAS 1.43% 30.45 End-of-day quote.32.28%
ROYAL DUTCH SHELL -0.07% 27.2 Delayed Quote.6.10%
WTI -0.81% 56.58 Delayed Quote.25.40%
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Financials (BRL)
Sales 2019 302 B
EBIT 2019 90 783 M
Net income 2019 45 305 M
Debt 2019 297 B
Yield 2019 2,94%
P/E ratio 2019 9,53x
P/E ratio 2020 10,5x
EV / Sales2019 2,33x
EV / Sales2020 1,98x
Capitalization 408 B
Chart PETRÓLEO BRASILEIRO S.A. - PETROBRAS
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Petróleo Brasileiro S.A. - Petrobras Technical Analysis Chart | MarketScreener
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Technical analysis trends PETRÓLEO BRASILEIRO S.A. -
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 12
Average target price 35,43  BRL
Last Close Price 29,71  BRL
Spread / Highest target 38,0%
Spread / Average Target 19,2%
Spread / Lowest Target 7,71%
EPS Revisions
Managers
NameTitle
Roberto da Cunha Castello Branco Chief Executive Officer & Director
Eduardo Bacellar Leal Ferreira Chairman
Andrea Marques De Almeida Chief Financial & Investor Relations Officer
Rudimar Andreis Lorenzatto Chief Technology & Production Development Officer
Marcelo Filho Director
Sector and Competitors
1st jan.Capitalization (M$)
PETRÓLEO BRASILEIRO S.A. - PETROBRAS32.28%100 374
ROYAL DUTCH SHELL6.10%238 015
PETROCHINA COMPANY LIMITED-20.70%146 081
TOTAL6.75%141 876
GAZPROM PAO--.--%92 362
PUBLIC JOINT STOCK COMPANY ROSNEFT OIL COMPANY14.92%74 611