Petroleo Brasileiro S.A. (PBR) or Petrobras S.A. – the largest integrated energy firm in Brazil and one of the largest in Latin America – bought a 30% stake in an offshore oil block from Repsol YPF (REP) and Statoil ASA (STO), Brazil’s oil regulator said.

The offshore block, known as BM-C-33 block, is located in the Campos Basin off the Brazilian coast. Repsol and Statoil each hold a 50% interest in the block. The companies have each agreed to sell a 15% stake to Petrobras. Additionally, Petrobras also agreed to purchase a 20% stake in the BM-S-51 block from Repsol.

We continue to have a positive medium- to long-term outlook on Petrobras for its encouraging portfolio of investments, particularly in Brazil’s so-called “pre-salt reservoirs” that lie below the Espírito Santo, Santos and Campos basins in deep and ultra-deep water.

Petrobras is the operator in most of these exploration areas, with stakes ranging from 20% to 100%. Considering Brazil’s huge pre-salt oil reserves (estimated at 9.5 to 14 billion barrels of oil equivalent), widely thought to be the most important oil find in recent years, we believe Petrobras is poised to maintain an impressive production growth profile for years to come.

Petrobras has also been stepping into various international regions with significant investment for upstream projects. The company is successfully utilizing its Brazilian deepwater expertise into exploring upstream opportunities abroad, particularly in areas where many other international companies find it difficult to compete.

Our Outperform rating for Petrobras ADRs reflects its solid investments, strong pipeline of development projects, impressive recent exploration successes and compelling long-term outlook. In the last four weeks, the price of Petrobras ADRs has jumped nearly 13% to close at $43.86 yesterday.

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