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

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

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways 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

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!