Reviewing Emerging Oil Giants Petrobras, CNOOC, and PetroChina (PBR, CEO, PTR)

Leading oil and gas industry news source, Platts, named Brazil’s national oil company Petroleo Brasileiro (NYSE:PBR), aka Petrobras, its hydrocarbon producer of the year for 2008. Platts cited Petrobras for its “sheer across-the-board excellence” in both management and operations.  By the looks of it, there are differences and similarities among emerging market oil giants such as China’s large CNOOC Ltd. (NYSE:CEO) and even PetroChina Co. Ltd. (NYSE: PTR).

Petrobras produced 2.4 million barrels of oil equivalent/day in 2008 and plans to grow production to almost 3.5 million barrels/day by 2012 and more than 4 million barrels/day by 2015.

Perhaps Petrobras’s greatest strength is its ability to get oil out of the deep water deposits off Brazil’s coast. New discoveries offshore of Brazil could be as high as 80 billion barrels, but the deposits lie under thousands of feet of water and more thousands of feet of seabed. Petrobras expects to spend $175 billion over the next five years to explore and develop just one discovery, the Santos Basin.

By itself, Petrobras probably couldn’t afford the capital spending to bring in such a huge project. The company has accepted a $10 billion loan from a Chinese bank in exchange for 100,000 barrels/day of crude for the next 10 years. Petrobras has also joined with one of China’s largest producers, CNOOC Ltd. (NYSE:CEO) to develop fields offshore China.

CNOOC’s net daily production of nearly 570,000 barrels of oil equivalent/day in the first quarter of 2009 was less than a quarter of Petrobras’s 2008 production. But CNOOC has been growing production at a rate of about 15% a year, and new discoveries in its own backyard help the company to keep costs down.

CNOOC also owns stakes in projects offshore Nigeria, Indonesia, and Australia. So far these projects produce less than 10% of the company’s liquids, but they do contribute nearly 40% of natural gas production.

Although CNOOC is just the third-largest Chinese oil company, it benefits from not having any refining facilities. And it probably has the best management team of the lot. The company has remained focused on finding and developing right along China’s own coast.

CNOOC has taken stakes in foreign projects very likely at the instigation of the Chinese government. It is part of the price the company pays for being a state-owned entity. Petrobras, on the other hand, is developing more like a large independent oil company, renting out its expertise in deep water drilling while exploring and developing its own resources.

PetroChina Co. (NYSE: PTR) said this week that its first-quarter net profit fell 35% because of lower oil prices and weaker energy demand.  The company’s net profit was almost $2.8 billion, down by roughly one-third from a year earlier. Revenue at PetroChina fell by 30%.

ADS prices for CNOOC are up about 3.5% in early trading, and Petrobras is up nearly 3% this morning.  PetroChina is also seeing shares rise by 3% this morning.

Paul Ausick
April 29, 2009