Brazilian oil giant Petroleo Brasileiro S.A. or Petrobras ( PBR - Analyst Report ) announced the discovery of hydrocarbon accumulation in the pre-salt layer in block BM-C-33, south of Campos Basin.

Located about 121.2 miles from the coast of Rio de Janeiro State, the discovery was made in the well – informally known as Pao de Acucar –– at a water depth of 9,186.4 feet.

The well is estimated to hold a 1,574.8 feet thick hydrocarbon column, with approximately 1,148.3 feet of hydrocarbon-bearing reservoirs. Initial tests and analysis of a partial section of one of the reservoirs reveal a daily production capacity of 5,000 barrels of oil and 807 thousand cubic meters of gas.

Apart from Petrobras, which has a 30% interest in the concession, Norwegian company Statoil ASA ( STO - Analyst Report ) holds a 35% stake. The remaining interest is controlled by operator Repsol Sinopec –– a partnership between Spain's Repsol-YPF and China’s state controlledChina Petroleum & Chemical Corporation or Sinopec ( SNP - Analyst Report ) .

The consortium plans to conduct extensive drilling and evaluation in the area to confirm the extent and volume of the discovery. The block is believed to be resource rich, as already proven by other prominent finds – Seat and Gavea.

We continue to remain upbeat on the medium- to long-term outlook on Petrobras based on its encouraging portfolio of investments, in particular in the prolific Espirito Santo, Campos and Santos Basins of Brazil. The company is the operator in most of these exploration areas in which it holds interests ranging from 20% to 100%.

In early February, Petrobras announced the discovery of an accumulation of crude oil and natural gas in Solimoes Basin of the Amazon, onshore northwest Brazil.

However, the company remains exposed to volatile oil and gas fundamentals, which are expected to impact its performance. Moreover, we are concerned by Petrobras’ huge investment requirements, operational hindrances and international business risks.

As such, we expect the company to perform on par with the broader industry and maintain a long-term Neutral rating on the stock. Petrobras ADRs currently retain a Zacks #3 Rank, which translates into a short-term Hold rating.