petrobras Brazil's state-owned oil and gas giant PBR recently acquired three oil and gas interests. shell company SHEL is operating an exploration block off the coast of Sao Tome and Principe in a strategic move that marks its re-entry into Africa's oil and gas exploration sector. This important development marks Petrobras' resurgence in African exploration after its withdrawal from Nigeria. This acquisition is a testament to the company's commitment to diversifying its portfolio and expanding its global footprint in line with its long-term strategic goals.
Resumption of exploration activities
The acquisition of interests in exploration blocks 10, 11 and 13 in São Tomé and Príncipe means that Petrobras will resume exploration activities on the African continent. By signing amendments to the Production Sharing Agreement (PSC) and Joint Operating Agreement, PBR solidifies its position as a key player in the consortium for these blocks. This move is in sync with the company's overarching strategy aimed at recovering oil and gas reserves by exploring new frontiers and fostering strategic partnerships.
Strategic partnership with Shell
Petrobras' re-entry into African exploration was facilitated by a memorandum of understanding (MoU) with SHEL outlining opportunities for cooperation in the upstream sector. This partnership highlights PBR's commitment to identifying and exploiting profitable business opportunities in major energy markets. With the approval of Petrobras' Board of Directors to operate in São Tomé and Príncipe, the company secures significant interests in Blocks 10, 11 and 13, thereby cementing its position as a leading player in the region.
Ownership of the exploration block and composition of the consortium
The ownership and consortium composition of the three exploration blocks vary, reflecting the diverse partnerships and collaborative efforts within the industry. Block 10 is jointly owned by SHEL (40%), Petrobras (45%) and ANP-STP (15%), with SHEL acting as the operator.
Similarly, in Block 11, SHEL (40%), Petrobras (25%), Galp (20%), and ANP-STP (15%) cooperate, with SHEL as the operator. Block 13 follows a similar pattern, with participation from SHEL (40%), Petrobras (45%), and ANP-STP (15%), with SHEL conducting similar operations.
Alignment with strategic planning
Petrobras' acquisition of the Sao Tome and Principe exploration block aligns seamlessly with the company's 2024-2028 strategic plan, which prioritizes investments in oil and gas exploration. Significant investments are planned for oil and gas, with Petrobras aiming to increase its reserves and consolidate its position as the world's leading energy company. This strategic focus underscores Petrobras' commitment to leveraging traditional energy sources while embracing the transition to greener alternatives.
Driving growth through oil and gas
PBR views oil and gas as catalysts for growth, driving both economic prosperity and technological progress. The company's strong 2023 production totaled 2.78 million barrels, highlighting its operational capabilities and commitment to meeting global energy needs. Petrobras' focus on sustainable growth underscores the company's proactive approach to addressing environmental issues while meeting energy needs.
PBR's return to African oil and gas exploration through the acquisition of the Sao Tome and Principe exploration block represents a milestone in its strategic trajectory. With a renewed focus on diversification, strategic partnerships and sustainable growth, Petrobras is poised to take advantage of new opportunities in the global energy landscape.
Zacks Rank and Key Picks
Currently, PBR and SHEL both carry a Zacks Rank #3 (Hold).
Investors interested in the energy sector may look at higher-ranked stocks such as: Subsea 7 SA with subsi energy transfer LP ET, both currently sport a Zacks Rank #1 (Strong Buy).You can see See the complete list of today's Zacks #1 Rank stocks here.
Subsea 7 is valued at $3.89 billion. The company currently pays a dividend of 38 cents per share, or 2.98%, on an annual basis.
SUBCY provides offshore project services for the energy industry, specializing in subsea field development covering project management, design, engineering, procurement, manufacturing, exploration, installation and commissioning of subsea production facilities.
Energy Transfer is valued at $43.84 billion. The company currently pays a dividend of $1.26 per share (9.04%) on an annual basis.
ET is an independent energy company principally engaged in the acquisition, exploration, development and production of crude oil and natural gas.
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