BMI: Brazil - Petrobras Outlook Brightened By Strong 2010 Performance And Higher Oil Prices

March 25, 2011 - PRLog -- The strong financial performance will be welcomed by investors as it puts the company in an improved financial position to start the monumental and expensive task of developing Brazil's subsalt discoveries.

Petrobras reported full-year net income of BRL35.2bn (US$21.1bn), a record high for the company and an increase of 17% on 2009. The results were boosted by a strong Q4, in which the company reported net income of BRL10.6bn (US$6.36bn), up nearly 40% year-on-year (y-o-y) from 2009. The company's exploration and production (E&P) segment led the way, with net income rising by more than 50% from BRL19.2bn (US$11.5bn) in 2009 to BRL29.7bn (US$17.8bn) in 2010. Although the upstream segment of the company's business flourished on the back of higher oil prices, the downstream segment was hit hard, with net income falling precipitously from BRL13.5bn (US$8.1bn) in 2009 to BRL3.7bn (US$2.2bn) in 2010.

Rising Tide

Crude production for 2010 averaged more than 2mn barrels per day (b/d) and a closer look at the breakdown of production offers clues about the future direction of the company. Production from the Campos Basin still dominated the company's output, accounting for nearly 80% of output, but was down slightly on 2009. Instead, increased production from the 'other offshore' segment - which includes the Santos Basin, home to some of the largest subsalt discoveries such as the multibillion-barrel finds at Lula (formerly Tupi) and Libra - drove production higher. Indeed it is the development of these discoveries that are at the heart of Petrobras' growth plan. Almir Barbassa, the company's financial director, told reporters that the company expected production to average 2.1mn b/d in 2011. Petrobras is targeting about 4mn b/d of oil production by 2020.

This is all good news for Petrobras. We have highlighted two central risks to the company's ambitious US$224bn investment programme: oil price volatility and project execution. BMI is now pencilling in an OPEC basket average of US$90 per barrel (bbl) for 2011, US$10/bbl higher than before unrest in the Middle East spread to Libya, resulting in soaring oil prices. Rising oil prices improve the company's financial outlook and should put it in a strong position to fund its expansion. Petrobras will need all the financial muscle it can get. The company aims to bring 16 major upstream projects onstream from 2011 to 2014, including a number of technically challenging and expensive subsalt projects.


BMI: Brazil Oil and Gas Report Q3 2010:
http://www.reports-research.com/market-surveys/brazil-rep...

BMI: The Brazil Oil & Gas Competitive Intelligence Report 2010:
http://www.reports-research.com/market-surveys/brazil-com...

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