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Keeping up with its record of discovering crude oil across Brazil, Petroleo Brasileiro S.A. or Petrobras (PBR - Analyst Report) has hit upon an oil and gas reserve in the Sergipe-Alagoas basin, off the northeastern coast of the country.

Located at a water depth of about 9,104.3 feet, the discovery was made in the exploration well 1-BRSA-1088-SES (1-SES-168), also called Moita Bonita. The well is situated on block BM-SEAL-10 in the SEAL-M-499 concession – whose 100% operating interests are controlled by Petrobras.

In a bid to confirm the discovery, the company performed log analysis and fluid samples recovered by cable testing.

This new discovery lies 21.7 miles to the southwest of Barra accumulation, where Petrobras struck superior quality gas while drilling the 1-BRSA-851-SES (1-SES-158) well in October, 2011. Two days back, the company announced the completion of drilling of first appraisal well in the region.

Petrobras plans to conduct extensive drilling activities in the above-mentioned area and put forward an Appraisal Plan (PAD) to the National Petroleum, Natural Gas and Biofuels Agency (ANP).

Headquartered in Rio de Janeiro, Petrobras primarily engages in exploration, exploitation and production of oil from reservoir wells, shale and other rocks; in refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, as well as in other energy-related activities.

Recently, Petrobras came out with weaker-than-expected second quarter 2012 performance, mainly attributable to a depreciating local currency and high exploration costs.

Petrobras posted second-quarter loss of R$1.3 billion or R$0.11 per share, compared with earnings of R$10.9 billion or R$0.84 in the year-earlier quarter. Loss per ADR came in at 10 cents (1 ADR = 2 shares), contrary to the Zacks Consensus Estimate of 33 cents in profit. During the corresponding period last year, however, Petrobras earned $1.06 per ADR.

We also remain concerned about the regulated prices, policy uncertainty and the company’s ambitious investment program. Hence, we maintain a long-term Underperform recommendation on the stock.

Petrobras – the fourth biggest oil company by market capitalization after ExxonMobil Corp. (XOM - Analyst Report), Royal Dutch Shell plc (RDS.A - Analyst Report) and Chevron Corporation (CVX - Analyst Report) – currently retains a Zacks #5 Rank that translates into a short-term Strong Sell rating.

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