Lastly, the company has secured a new contract for the LT-Super 116E jack-up rig “West Freedom” in Venezuela. The duration of the contract is 30 months, with an extension option of six months, and the potential revenue is estimated at $222 million. The West Freedom rig is currently operating in Qatar, and it is expected to be operational in Venezuela in late 2013.
Overall, the company is securing new contracts on a regular basis, and it is meeting the strong demand by acquiring new rigs. Its modern fleet may enable the company to obtain more contracts in the near future. Hence, I believe this is a perfect growth stock, which also offers a nice dividend.
Speaking of Brazil…
Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) operates as an integral gas and oil company in charge of exploration, production, refinement, transportation and even import/export activities in Brazil. The company operates with a price-to-earnings ratio of 8.9 compared to the industry average of 8.7. Its revenue in the last quarter almost doubled to $72 billion, and its net income rose by 50% to $7.6 billion, or 1.18 per share.
Its cash from operations almost doubled to $14.8 billion, and its free cash flow jumped from $3.2 billion to $14.8 billion. The 4% dividend payment should not be in danger as long as the free cash flow remains strong. The dividend has been hiked on a continuous basis, and investors should expect a jump in the interim.
Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR)’ production is increasing, and I believe revenue should continue to grow. Production in the Santos Basin Nordeste pre-salt region started in June. The platform is expected to process up to 120,000 barrels of oil per day and 5 million cubic feet of gas per day. Peak production is expected for the second half of 2014.
The company will also develop new rigs in the pre-salt basin in conjunction with Seadrill Ltd (NYSE:SDRL) beginning in 2016.
In brief, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is expanding operations offshore in the pre-salt basin, and its revenue should increase in the second half of the decade. Investors may observe capital appreciation in the form of dividends, and with a strong free cash flow, dividend hikes should be expected in the interim.
For these reasons
These companies offer an excellent investment prospectus, and they fit well in growth or income-oriented portfolios. I do not expect oil prices to fall to the low $90s in the near future due to a strong demand, and revenue for these companies may jump considerably in the third quarter of 2013.
The article Why Aren’t You Investing in Oil? originally appeared on Fool.com and is written by Robinson Roacho.
Robinson Roacho has no position in any stocks mentioned. The Motley Fool recommends Petroleo Brasileiro S.A. (ADR) and Seadrill. The Motley Fool owns shares of Seadrill. Robinson 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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