Petrobras, PetroRio and ExxonMobil in focus | | |
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Follow our webinar page to make sure you don't miss out on any relevant content for you. | Press releases Exploration activity in Guyana to speed up, with record number of wells set for 2021 >> Read here With hopes up after 2020’s success, Africa and the Americas host most of the top 30 high-impact wells for 2021 >> Read here | COVID-19 Report Rystad Energy's public version of the COVID-19 Report will be updated monthly, offering scenario analyses, and evaluating the impact on global energy markets. >> Access here | Rystad Energy takes renewables global Clients can now benefit from full global data, analytics and advisory capabilities within the renewable energy sector, as they have come to expect from other product lines within Rystad Energy’s Solution Suite. >> Read More | Newsletter Subscription If you are not yet a subscriber to our industry newsletters and want to get monthly updates, please fill out the Newsletter Subscription Form. | | | Executive summary from Head of Latin America, Mr. Parker Bem-vindos, bienvenidos and welcome again to our second edition of the Latin America Newsletter. As we close out the first quarter of 2021 with a higher than anticipated and relatively stable crude price, we are seeing significant activity in the oil and gas sector in the region. However, a stabilization in prices does not mean that things will become static, as evidenced by the changes at the top within Petrobras. The ouster of Castelo Branco as CEO, to be replaced by a former army general, is only one part of a total overhaul of the Board of Directors for the company, which is due to seat the new board members by April 12. Of the named candidates to replace sitting board members many have a history with Petrobras or with the oil and gas industry, or with both, which is ultimately a good sign that pragmatism is prevailing over politics. Although investors reacted negatively in the immediate aftermath of the announced changes, our view is that most of the companies planned initiatives will continue to move forward especially concerning the divestment program. It is important for the new CEO and Board of Directors to demonstrate their commitment to continuity, and indeed, we anticipate that by the second half of 2021 Petrobras will have reached the speed that they are looking for in the divestment program in terms of selling assets faster and for a higher price. All of this aided by the new gas law which was approved by congress last week. The risk here is more long term in nature, and it will take time to manifest. With a presidential election looming next year the definitive question is; how long will this new CEO and Board of Directors have to define themselves and the company they have been selected to run? | PetroRio strengthens grip on Brazil’s Campos Basin – more deals likely Brazilian independent PetroRio is expected to continue to strengthen its grip on Brazil’s Campos Basin following a recent wave of acquisitions, as the company moves to substantially grow its resource base for future production. While PetroRio has thus far opted to stay focused on acquiring already established assets, it remains to be seen whether it will cast the net wider and expand its portfolio into pure exploration plays with higher risks involved. PetroRio agreed to acquire an additional 28.6% stake in Block BM-C-30, home to the Wahoo field, from French major Total. The deal increased PetroRio’s share of the block to 64.3%, and its net recoverable resources to around 80 million barrels of oil. The recent deal comes after PetroRio acquired an initial 35.7% stake in Wahoo from UK supermajor BP, as well as a 60% interest in Campos Basin Block BM-C-32, which hosts the Itaipu field. Rystad Energy estimates the value of Total’s traded portfolio, assuming our base case of $63 per barrel, to be around $280 million. We can expect PetroRio to continue to investigate suitable assets for acquisition and build on its resource base. | ExxonMobil drills a rare duster in Guyana, but 2021 has more in store Guyana has started the year with an exploration disappointment as a partner in the ExxonMobil-operated Canje block this month revealed that the first wildcat in the license failed to deliver. The result follows a 2020 that saw the number of exploration wells drilled in Guyana fall for the first time since 2015, while new discovered volumes shrank to 1 billion barrels from 3 billion barrels in 2019. Despite the initial hiccup at Canje, 2021 promises to be exiting, however, with a rebound in the number of wells and exploration activity spreading across several blocks beyond Stabroek. | Can Petrobras deliver on its 2021 promises? The difficult circumstances created by the Covid-19 pandemic have taken a heavy toll on Brazilian state oil company Petrobras, with a 30% slide in revenues in 2020 and widespread public objections to its fuel pricing policy. Nonetheless, the Brazilian giant ended the year with a record production performance and sales exports. It also delivered positive results in terms of debt reduction and investment optimization. Petrobras delivered record production of 2.44 million barrels of oil equivalent per day (boepd) in 2020, 91% of which was liquids, with the state giant increasing its output for the second consecutive year. Total production climbed 3% compared to 2019, driven by a 21.2% increase from pre-salt fields, including project ramp-ups and startup of the Atapu field. Further pre-salt production growth is on the cards, as Petrobras recently took delivery of the Carioca FPSO from Dalian shipyard in China. Integration and commissioning of that unit is next on the agenda before being mobilized to the Sepia field in the Santos Basin. The vessel, with a processing capacity of 180,000 bpd of oil and 212 million standard cubic feet per day (MMcfd) of gas, is expected to come on stream by mid-2021. | The Coronavirus has had a devastating effect in Brazil over the past year, and widespread lockdowns contributed to a 6.3% decrease in Petrobras’ domestic market sales volume. Its external market sales volume, on the other hand, ramped up by 24.6% in 2020, driven by a 95% increment in net exports of crude oil and petroleum products. Petrobras’ solid cash generation from exports, inventory reduction and record production levels, alongside the steps it took to rein in capex, contributed to a 13.3% reduction in gross debt, from $87.1 billion at the end of 2019 to $75.5 billion in December 2020. Furthermore, Petrobras’ fuel pricing policy, which had been working in accordance with international parity since 2016, has seen significant changes over the first two months of 2021 with the price of petrol rising 34.8% and the price of diesel climbing 27.7%. This has sparked widespread displeasure amongst the public in general and truck drivers in particular. Given that Petrobras’ fuel rates are still 6-12% below competitors’ prices, more increases are expected in the months to come. | The turbulent situation escalated last month when Brazilian President Jair Bolsonaro surprised markets by appointing a new CEO to lead Petrobras – retired army general and former Defense Minister Joaquim Silva e Luna. The company has a long-term strategic plan in place and is safeguarded by its status. The expectation for 2021 is to consolidate its position as a major exporter of crude oil, boost revenues from divestments, and increase its dividends. The divestment initiative started off on a promising note this year, with Petrobras disclosing that it had agreed to sell producing gas assets in Peroa-Cangoa Block in the Espirito Santos Basin for $55 million to OP Energia and DBO Energia. Just days later, the sale of the company’s stake in Petrobras Uruguay Distribucion was confirmed, attracting a price of $62 million on top of the $6.17 million preliminary fee paid in October 2020. Most recently, Petrobras announced a $220 million deal with PetroReconcavo for the sale of nine onshore fields in the producing Miranga cluster. | Petrobras will undoubtedly face significant challenges in 2021 as it strives to sustain its position in the market. Both the company and the country are hoping for higher oil exports that would help to revive the economy, which contracted by 4.1% in 2020. Meanwhile, Petrobras hopes to maintain the recent momentum achieved with regard to its divestment program. The recent surge of oil prices could help the company in that regard but, regardless of such short-term swings, Petrobras would be well-advised to streamline its asset sale process and grant interested parties more time to prepare bids. In a recent example, the company put a substantial asset on the table in November 2020 when it invited offers for a 50% stake in the deepwater Marlim Cluster fields in the Campos Basin. However, the asset’s estimated value of $3 billion combined with a short bid deadline of 11 December seemed to dissuade potential buyers, and the Marlim stake remains unsold. | Our articles and commentaries The above are samples from the full commentaries we offer in our Client Portal, which is part of our comprehensive energy intelligence offering. You may also find relevant content of interest in our press releases, freely accessible here. | | |
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