Petrobras Inks $590M Deal To Set Up Natural Gas Unit

Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR) recently inked a $590 million agreement to construct a natural gas processing unit in Rio de Janeiro. The company has signed the contract with a consortium comprising China's Shandong Kerui Petroleum and Brazil's Metodo Potencial engineering company. Notably, the unit is likely to be the largest in the country with processing capacity up to 21 million cubic meters a day (MMcm/d). The project will significantly increase the company's pre-salt gas outflow and processing infrastructure from 23 MMcm/d to 44 MMcm/d.

The Brazilian oil giant will commence the construction in the first half of 2018 with the unit expected to become functional by the second half of 2020. The plant will aid in processing the natural gas produced in Brazil’s pre-salt basins and contribute to reduce the country’s need for importing natural gas.

As it is, Petrobras’ attractive portfolio of investments, particularly its pre-salt reservoirs that lie below the Espírito Santo, Campos and Santos basins, in deep and ultra-deep water are expected to drive the production momentum of the company in the coming years. Notably, per its ambitious five-year plans, the Brazilian oil giant intends to boost average production from an expected 2.7 million barrels of oil equivalent per day (Boe/d) in 2018 to 3.55 million Boe/d by 2022.

The company is also entering into various strategic partnerships with foreign oil giants to drive exploration momentum. In this regard, Petrobras has inked deals with major players like TOTAL S.A. (NYSE:TOT) , Royal Dutch Shell (LON:RDSa) plc RDS.A and Statoil (OL:STL) ASA (NYSE:STO) .

Petrobras is currently concentrating on its financial health through divestments and spin-offs, thereby gaining additional liquidity, as it intends to increase investment in ultra-deep-water projects. The company’s divestment program of $21 billion throughout 2017-2018 is expected to help reinstate its financial health by mitigating the leverage. Petrobras carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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