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 Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

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!