Joined Jan 27, 2008
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You are a sick man Cajun.
Have a good weekend.
In this shitty market, they say that a hero can save us.
http://youtube.com/watch?v=fRnjBQwarUk
I’m not going to stand here and wait.
Unreal volume
Why such high volume on HERO, TTES & few other names? Almost 5x the normal volume. Is it due to index rebalancing?
Nice picks RC. I’ve been following your picks for awhile and most of them are golden. Keep up the good work.
fm Barrons – PBR could see egregious poppage/marking up, fm this article Monday.
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Monday, June 30, 2008
FEATURES MAIN
Drilling Deep and Flying High
By KENNETH RAPOZA
Brazil’s Petrobras could become one of the world’s top oil companies if its three new deepwater wells are as plentiful as some expect.
THERE ARE GUSHERS and then there are gushers.
At a time when the oil industry is struggling mightily to find new wells, Brazil’s Petrobras is sitting atop what appears to be the Western Hemisphere’s biggest find in 30 years. The Tupi oil field, discovered off Rio de Janeiro two years ago and 65% owned by Petrobras, may contain as much as eight billion barrels of oil, an amount that would boost Brazil’s reserves by more than 50%.
As if that weren’t enough, the company has since found three other potentially lucrative, deepwater wells in the same area. And, with sophisticated operations in the Gulf of Mexico, it could be a big winner in President Bush’s new drive to lift U.S. moratoriums on offshore drilling.
Newscom; inset: Tomohiro Ohsumi/Bloomberg News
Petrobras operates rigs like this one off Brazil. Its president, Jose Sergio Gabrielli, inset, sees “practically zero” risk that the latest finds will be duds.
All this and high oil prices, too. Can it get any better?
In fact, Petrobras is a singularly tantalizing investment. “Buying Petrobras today is like having the opportunity to invest in Saudi Aramco 40 years ago,” says Shawn Reynolds, portfolio manager of Van Eck Global’s $1.03 billion Hard Assets Fund. Saudi Aramco, Saudi Arabia’s state-owned oil company, today is the world’s largest oil corporation in terms of proven reserves and production.
Investors already have struck it rich with Petrobras’ stock (ticker: PBR for the American depositary receipts). Recently trading around $70, it has more than doubled over the past 12 months, far outpacing such rivals as ConocoPhillips (COP), Chevron (CVX) and ExxonMobil (XOM). Yet, bulls say the stock could climb another 25% or so within a year, perhaps hitting $90.
“If you’re in oil, you have to own this stock,” says Robert Levitt, asset manager of $500 million Levitt Capital Management, in Boca Raton, Fla. “They are sitting on the biggest oil find in years, that’s why. You don’t look at resource companies based on earnings; you look at their oil reserves. Exxon and Conoco aren’t making any new discoveries. Petrobras just made the biggest one in years.”
The Tupi field, named after a Brazilian native tribe, holds anywhere from five billion to eight billion barrels of oil, Petrobras says. Last year, the company made another find nearby, the Carioca well. And this past May, Petrobras announced the discovery of the Bem-Te-Vi field, followed in June by the Guara — in the same basin, under 1.33 miles of ocean and rock.
Petrobras holds a 65% stake in this collection of wells, with the British oil and gas company BG Group (BG.UK) holding 25% and Galp Energia of Portugal holding the rest. So, if Tupi were to yield six billion barrels of oil, Petrobras would effectively add about four billion to its current proven reserves of 11.7 billion barrels.
EXACTLY HOW MUCH PETROLEUM the three newer wells are likely to yield is still unknown. But, as Petrobras’ president, Jose Sergio Gabrielli, told the Wall Street Journal this month, the risk of finding no oil in the basin where it is drilling is “practically zero.” He was unavailable to comment for this article.
Table: The Petrobras Edge1Analysts say that Tupi’s potential is already priced into the stock, but oil from the other three is not. If those wells prove productive, the stock could surge. On the other hand, if they turn out to be duds, the stock would stop rising and probably fall in the short term.
Though it could take a year for the picture to become clear, there’s good reason for optimism. “Gabrielli has a plan to develop those discoveries, and it is not going to take any technological leaps,” says Annette Hester, an energy policy analyst for the Center for Strategic and International Studies in Washington and the Center for International Governance Innovation in Canada. Hester is in a good position to know: She recently met with Gabrielli in Rio de Janeiro to discuss the company’s latest finds. “They’ve been deepwater drillers for 40 years and have the people and have the processes in place,” she adds. “They’ve got top-line people. Are they credible? Absolutely.” In a clear sign of progress, Petrobras already has contracted many of the drilling vessels needed for the sites.
Not only is the company promising, but the stock looks reasonably priced, trading at about 14 times estimated 2009 earnings. That’s a bit higher than the multiples of ExxonMobil and other oil majors — but they’re not sitting on big new oil fields. JP Morgan, which last week upgraded Petrobras’ ADRs from Neutral to Overweight, sees them headed to $85. Reynolds of Van Eck Global has a target of $85 to $90.
THAT’S NOT TO SAY that Petrobras, 55.7% of which is controlled by Brazil’s government, doesn’t face challenges “…The company carries a lot of risk,” says Roberto Padovani, chief strategist at investment bank WestLB. “You see, the government never lets Petrobras raise gasoline prices because of inflation fears, and that causes it to lose [revenue], compared to its peers.”
In May, Brasilia allowed gasoline prices to rise for the first time in nearly three years. They jumped 10% at the refinery level.
Meanwhile, Petrobras’ style of deepwater drilling, which goes below the salt masses in ocean floors, is about three times as costly as normal deepwater drilling, says Levitt, the asset manager. “It’s not like Iraq, where you poke your finger in the sand and the oil comes out.”
Still, if the new discoveries are proven, Petrobras will become an oil giant, like Venezuela’s Petroleos de Venezuela. “Petrobras has everything to be one of the top three oil majors in the world,” says Adriano Pires, director of the Brazilian energy and infrastructure consultancy CBIE.
The company still hasn’t been able to make Brazil a pure net exporter of oil. In 2008’s first four months, it posted an oil and oil derivatives (mostly diesel) trade deficit of $2.7 billion, versus a shortfall of $378.5 million a year earlier, according to Brazil’s National Petroleum Agency, ANP.
The Bottom Line
Petrobras stock, which has more than doubled in the past year, could rise another 25% if three offshore wells discovered by the company prove as plentiful as some expect.But investors clearly have big hopes for the company. Petrobras’ market value now is close to $300 billion, more than double its level last year. The only U.S. oil company valued higher is ExxonMobil, with a market capitalization near $460 billion.
“With oil prices where they are, I don’t think Petrobras is overvalued,” says Ilan Goldfajn, a senior partner at Ciano Investments, a Rio de Janeiro hedge fund. “At these oil prices, I see an upside.”
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KENNETH RAPOZA is a reporter for Dow Jones Newswires in Sao Paulo. His colleague ROGERIO JELMAYER contributed to this story.
MONDAY, JUNE 30, 2008
The Petrobras Edge
TEXT SIZE PRINT EMAIL DIGG SINGLE PAGE REPRINTS GET RSS By some measures, Petrobras is more expensive than some other integrated majors. But the promise of the potentially huge offshore oil find in Brazil has boosted its stock recently.
Company/ Chevron Conoco
Phillips Exxon
Mobil Petrobras
Ticker CVX COP XOM PBR
Recent Price# $99.36 94.02 87.60 68.83
YTD Change# 6.5% 6.5 –6.5 19.5
Revenue 2008E(bil)$297 222 643 66
EPS 2008E $11.69 11.93 9.17 3.62
P/E Ratio 2008E## 8.5 7.9 9.6 19.0
Proven Reserves 12/07 (mil bbl)10.8 10.6 22.7 11.7§
Cash Flow (bil)*$37.3 47.2 73.7 27.5
Debt (bil)** $6.8 21.5 10.0 23.9
Annual Dividend $2.6 2.0 1.8 1.1
E=Estimate.
# Through June 25.
## Based on recent price and estimated 2008 earnings.
* As measured by annualized earnings before interest, taxes, depreciation and amortization, through March.
** As of March 31.
§ This figure is as of June 2008.
Sources: Thomson Reuters; company reports
PBR was one of Cramer’s picks last year in his “Stay Mad” book.
He calls it “Pabst Blue Ribbon”. http://www.pabst.com/
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What was the deal with the volume in HERO? 3.5 million shares went right at the close and spike the stock $1.00. That is some heavy heavy buying…could be a big week for the stock. Think I’m going long HERO and PBR bigtime next week.
I may buy some HERO and immediately put a sell 2 points higher.