Petroleo Brasileiro Petrobras SA (ADR) (PBR), Diamond Offshore Drilling Inc (DO): Who Will Benefit From Brazil’s Pre-Salt Region?

Page 1 of 2

Over the next 10 to 15 years, as Brazil looks to transform itself from energy importer to energy exporter this will create substantial opportunities for investment. Even though there will be many companies what will benefit from Brazil’s transformation, government supported Petroleo Brasileiro, or Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), Diamond Offshore Drilling Inc (NYSE:DO), and Halliburton Company (NYSE:HAL) are three companies poised to reap the rewards of this vast opportunity.

The transformation from energy importer to energy exporter will make Brazil the largest producer of crude oil in Latin America. One vast region that the Brazilian government is looking to develop is the Pre-Salt region off the Southeast coast of Brazil. According to the EIA, this Ultra-Deep water region has ”recoverable oil and natural gas reserves at more than 50 billion barrels of oil equivalent (BOE).”

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is a company that operates as an integrated oil and gas company in Brazil. Petrobas, who is 54% owned by the Brazilian government, is planning to invest US $53.4 billion in the Pre-salt reserves by 2015. Aided by high growth demands and massive potential in the Pre-Salt region, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) expects production levels to increase to more than 1 million bpd by 2017 and 2.1 million bpd by 2020.

As the chart to above indicates, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is also expecting oil production to increase substantially over the next seven years. They are looking for oil production to increase from 1,908 kbpd in 2012 to an estimated 4,200 kbpd by 2020 which represents an increase of 120%. As the chart indicates most of the increase in oil production will occur from gains in the Deep-water and the Ultra-deep water regions off the coast of Brazil.

As the depth of the Pre-Salt region is very deep (between 5,000 and 7,000 meters) and is challenging to access, this is presenting opportunities and unparalleled challenges for drilling service companies. Halliburton Company (NYSE:HAL) is a drilling service company on the leading edge of the Brazilian front. To help develop these fields, Halliburton has recently opened a Technology Center in Rio De Janeiro. Tim Probert, president of Strategy and Corporate Development for Halliburton stated, “This state-of-the-art center in Brazil, which is close to our customers, allows us to accelerate new technology development and enable Halliburton to deliver even more innovative solutions to our customers faster”.

Halliburton’s growth in Latin America has been evident over the past couple of years. When comparing Q1 and Q2 revenues for 2013 to Q1 and Q2 revenues for 2011 and 2012, the growth in Latin America is very evident. In the first half of 2011, Halliburton’s Latin American revenues were $1.299 billion. In 2012, Halliburton’s Latin American revenues increased to $1.659 billion while in 2013 the company reported 1st half yearly earnings in Latin America at $1.889 billion. This represents an increase of 45.42% over the past three years.

Diamond Offshore Drilling Inc (NYSE:DO) is an offshore drilling company that has been producing a negative trend regarding its profitability over the past few years. The main reason for its declining profitability is that they have the oldest fleet amongst its competitors. New opportunities in the Brazilian Ultra-Deep Water will allow Diamond Offshore Drilling Inc (NYSE:DO) to capitalize on their long-term strategy to upgrade their existing assets and purchase new assets that will improve the company’s lagging profitability.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!