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Brazilian state-run energy giant, Petroleo Brasileiro SA or Petrobras (PBR - Analyst Report), announced the discovery of oil fields in the northeast coast offshore Brazil, along with its Indian partners.

The discovery, in the Seal-11 offshore exploratory block, is expected to produce over 1 billion barrels of oil per day, starting 2018. The region holds high levels of natural gas and superior quality light crude oil.

The find is expected to be more economical for Petrobras than the pre-salt coasts in the south. The oil fields in the Sergipe-Alagoas Basin are nearer to the coast compared to the fields in the south. Moreover, some of the required infrastructure already exists owing to Petrobras’ long presence in the Sergipe state, resulting in lower costs.
The Sergipe area is expected to have substantial growth potential and Petrobras has filed reports of several successful discoveries in the area with the Brazilian regulatory body. As per management, the newly discovered region has the potential of becoming Brazil’s largest oil source.

Petrobras has a 60% ownership in the exploratory block, while the remaining is held by IBV Brazil, a joint venture between two Indian companies – Videocon Industries Ltd. and Bharat Petroleum Corp.

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company operates in 6 different segments, exploration and production, refining, transportation and marketing, distribution, gas and power, biofuels and international.  

Petrobras currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider other stocks in the energy sector such as Magellan Midstream Partners LP (MMP - Analyst Report), Stone Energy Corp. (SGY - Analyst Report) and Dril-Quip, Inc. (DRQ - Analyst Report) as good investment options. These stocks currently hold a Zacks Rank #1 (Strong Buy).

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