In addition, the discovery of offshore resources which once portrayed an encouraging outlook now looks more problematic. Having to deal with government influence and needing substantial amounts of capital deployments to achieve exploitation due to the water depth –over 2000 meters- and geological structure of the fields, the risks are high, although the rewards are too, as the new developments could double Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR)’ resource base and production volumes. These huge investments have led to planned investments of $236 billion until 2017, considerably increasing the company’s leverage ratio.
However, the firm is the largest publicly-traded E&P company in Latin America. As such, its market share and scale are impressive; in Brazil, it is by far the largest. As the demand increases in the region, the firm should beneficiate largely, especially as its production levels have been steadily increasing and its current investments could unlock great potential. International expansion has grown a lot over the past years and will most likely continue, constituting another important growth catalyst. Furthermore, it has become an exporter of its own deepwater drilling technology, now used in other parts of the world such as the Gulf of Mexico and West Africa. Its refining activities provide further growth opportunities, especially as the demand and prices of diesel fuels continue in an uptrend.
Although this company is not the strongest of buys, it offers interesting long term growth prospects and trades at only nine times consensus estimates. This is why I would recommend keeping a close eye on this company and watching how it evolves. The unlocking of new assets could rocket its production and revenues.
Bottom line
Although the oil industry is a risky one with high capital requirements, especially in emerging countries, the companies above offer interesting long-term prospects and trade below the industry average. CNOOC Limited (ADR) (NYSE:CEO), in particular, seems poised to grow and deliver plenty of upside for investors in the years to come as the Chinese and world demand increases and the firm expands further coverseas.
The article 3 Oil & Gas Stocks From Emerging Markets originally appeared on Fool.com and is written by Victor Selva.
Victor Selva has no position in any stocks mentioned. The Motley Fool recommends Petroleo Brasileiro S.A. (ADR). Victor is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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