Is Petrobras at Risk Due to Its Exposure to Deepwater Oil Production?
The largest risk to Petrobras is its deepwater oil and gas exposure: deepwater production is more expensive than onshore oil production, and deepwater production tends to undergo faster peak times and stronger declines. These factors are partially mitigated by Petrobras very positive prospects, and overall undervaluation based on existing reserves, even with faster depletion rates – note that the standardized measure (the present value of oil and gas reserves, listed in an appendix to this article below) takes into account development costs. Conclusion Petrobras has very strong prospects going forward in both offshore oil and gas production and in ethanol production, and is relatively undervalued compared to its peers in the oil and gas major universe. These factors translate into Petrobras representing a compelling long term buy – even as the stock price has moved up over this past year. Note that this article did not look at Petrobras’ Downstream division (refining and marketing oper
