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Petrobras Begins Production from Lula North in Santos Basin

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Petróleo Brasileiro S.A. or Petrobras (PBR - Free Report) recently started production from the Lula North pre-salt region in Brazil’s Santos Basin. The company commenced oil and gas production from the deep-water project in the BM-S-11 block with the help of P-67 floating production and storage offloading (FPSO) vessel.

The FPSO vessel has a daily processing capacity of 150,000 barrels of oil and can compress 6 million cubic metres of natural gas. It is currently placed 260 kilometres off the coast of Rio de Janeiro at 2,130-meter water depth. The vessel will use a total of nine wells for production purpose and draw crude with the help of lifting vessels. Markedly, Petrobras is using pre-salt gas pipeline routes to produce gas.

Notably, the Lula field, which is the biggest producing field in Brazil, has two reservoirs, namely Lula and Cernambi. The Lula North was discovered in 2006. The company expects production from the Lula field to reach 1 million barrels per day this year.

Petrobras is operating through FPSO vessels — Lula Pilot, Lula Nordeste Pilot, Iracema Sul, Iracema Norte, Lula Alto, Lula Central, Lula Sul and Lula Extremo Sul — in the BM-S-11 block. While the company owns 65% operating stake in the block, Royal Dutch Shell plc and Petrogal Brasil hold respective interests of 25% and 10%.

With the commencement of production, Petrobras’ oil and gas output from the domestic region is expected to mark an increase and support its plan to reach 2.8 million barrels of oil equivalent per day (Boe/d) production in 2019. Markedly, in 2018, the company produced 2.63 million Boe/d, including 2.53 million Boe/d in Brazil.

The company expects production in the domestic market to grow 10% in 2019, with the help of the five sites that came online in 2018 and two more sites, which are likely to commence output in 2019.

Price Performance

The Brazilian state-run company has gained 23.7% in the past year compared with 10.3% growth of its industry.

 

Zacks Rank and Stock to Consider

Currently, Petrobras carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below.

YPF Sociedad Anonima (YPF - Free Report) is a Buenos Aires, Argentina-based integrated energy company. Its bottom line for 2018 is expected to increase more than 27% year over year. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Frisco, TX-based Comstock Resources, Inc. (CRK - Free Report) is an oil and gas exploration and production company. Its bottom line for 2018 is expected to increase more than 100% year over year. It delivered average positive earnings surprise of more than 44% in the trailing four quarters. The stock currently has a Zacks Rank #2.

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