How Is Petrobras Handling Hard Times?
Production from Petrobras’s upstream segment
Petrobras (PBR) produced 2.8 MMboepd (million barrels of oil equivalent per day) in 2015 from its worldwide operations. It is essential to consider that of the total production, 2.6 MMboepd, or 93%, is from Brazilian operations.
Petrobras’s production mix
Liquids account for 2.2 MMboepd, or 80%, of Petrobras’s total production. Petrobras’s liquids production rose in 2015 by 5% over 2014. The rise in liquids production was led by ramp-ups in the Roncador field, Parque das Baleias, and existing FPSOs (floating production, storage, and offloading unit).
Plus, new FPSOs like Cidade de Itaguaí and P-61 started operations, which partially offset the natural decline in existing fields. Similarly, in 2015, natural gas production saw a sharper rise by 10% over 2014.
Petrobras peers like Suncor Energy (SU), Total SA (TOT), and Statoil (STO) have a higher proportion of liquids compared to natural gas in their production mix. The iShares Global Energy ETF (IXC) has ~57% exposure to integrated energy sector stocks.
Petrobras’s upstream portfolio
Petrobras (PBR) plans to increase its liquids production to 2.8 MMbpd by 2020. It has a series of new projects to add to the existing production to offset the natural declines in mature fields. In 2015, Petrobras began operations in its Papa-Terra field and its Iracema Norte field in the first and third quarter, respectively. Petrobras expects the Lula Alto and Lula Central fields to start operation in 1H16. Plus, Lapa and PLD Libra are expected to start production in 2H16.
Going forward, in 2017, 2018, and 2019, Petrobras has ~16 new projects starting production. The new projects starting from 2015 to 2020 are expected to contribute 1.4 MMboepd, half of total projected liquid production in 2020. Plus, on adding the estimated natural gas production, Petrobras expects its total production to rise to 3.7 MMboepd by 2020.
Thus, with a strong upstream portfolio in a scenario of rising oil prices, Petrobras will witness improvement in its upstream segment earnings. Rising oil prices should also ensure that Petrobras (PBR) won’t have to take any more impairment losses in its vast upstream portfolio.
In the next part, we will discuss Petrobras’s refining segment.
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