Petrobras, BG Group Well Represented in Important New Oil Source

We issue new buy recommendations on Brazilian stock Petrobras (PBR) and U.K. stock BG Group plc (BRGXF.PK) in separate simultaneous analyzes triggered by stock price penetrating the 200-day average to the upside. More important, the companies are both well represented in the most important new oil province – the Pre-Salt formation beneath deep waters offshore Brazil. At the same time, the technological challenges are daunting, the capital requirements formidable and the politics uncertain.

Meanwhile, advancing oil price may reflect an improving economic outlook that also supports increased confidence in Brazilian oil. Futures prices for the next six years averaged almost $71 a barrel recently. It looks like a matter of just a few weeks before six-year oil penetrates its 40-week average presuming a continuing quote near the current level. In an earlier sign of improving investor confidence, we reinstated our buy recommendation on Chinese stock CNOOC Ltd. (CEO) on April 29.

Originally published on May 5, 2009

Comments

[Charles Pet...:]

Until you get drillbits to stop melting when they reach deep levels of pre-salt formations, I can't have any faith in Petrobras when compared to their competitors. I'd much rather be long their servicers (RIG, NE, DO, etc) than with PBR especially since PBR isn't a company run for the shareholders but for the populous.

May 31 06:03 PM