Barely a few days after announcing the successful drilling of the extension exploratory well in the Iara Evaluation Area of Brazil’s Santos Basin, Petroleo Brasileiro S.A. or Petrobras ( PBR - Analyst Report ) encountered an offshore reserve of fine quality oil, near the Lula field in the same basin.

Petrobras drilled the well 1-RJS-689A (1-BRSA-925A RJS), commonly known as Dolomita Sul, in Block BM-S-42, 177 km off the coast of Rio de Janeiro State and at 1,747 meters deep waters.

Petrobras, which is the sole owner of the concession, confirmed the discovery via oil sampling at the carbonate levels in the pre-salt layers of the block. The company believes that this find holds a lot of promise and intends to conduct further drilling to estimate the total potential of the reservoirs.

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil, dominating the country’s energy sector. The company operates in six segments: Exploration and Production, Refining, Transportation and Marketing, Distribution, Gas and Power, Biofuels and International.

We have a very positive medium- to long-term outlook on Petrobras thanks to its encouraging portfolio of investments, particularly in Brazil’s pre-salt reservoirs that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. The company is the operator in most of these exploration areas, and holds interests in them ranging from 20% to 100%.

We also appreciate the company’s consistent endeavors to dig new oil reserves across Brazil. Mid last month, Petrobras confirmed the discovery of superior quality crude oil in the Tupi Northeast pre-salt region of the Santos Basin. The company also hit a hydrocarbon accumulation in the pre-salt layer in block BM-C-33, south of Campos Basin, in early March.

However, we expect Petrobras to perform on par with the broader industry and other energy majors such as ExxonMobil Corp. ( XOM - Analyst Report ) , PetroChina Co. Ltd. ( PTR - Analyst Report ) and Royal Dutch Shell plc ( RDS.A - Analyst Report ) in the coming quarters. Hence, we maintain a long-term Neutral recommendation on the stock.