Petrobras Expects to Write Down Fewer Dry Wells Ahead

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SAO PAULO - Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, said Monday it expects to write off fewer dry wells in the quarters ahead, after its latest results took a surprise hit from exploration projects that failed to bear fruit.

Petrobras reported late Friday that it wrote off 41 dry or non-commercial oil wells in the April to June period, resulting in a cost of 2.74 billion Brazilian reais ($1.35 billion). Analysts expressed alarm at the figure, which rose from BRL545 million in the first quarter and BRL708 million in the second quarter of 2011.

"We don't expect to have a similar concentration [of well write-offs] in future quarters," Petrobras Director of Exploration and Production Jose Formigli said in a conference call.

Executives said the study period of a large number of exploratory blocks expired during the second quarter, contributing to the write-offs. But they don't see dry wells increasing as a proportion of exploration projects, and the company also expects to return fewer exploration blocks to the government in coming quarters.

Petrobras Chief Executive Maria das Gracas Foster said in the call that the company is working to accelerate production and cut drilling costs, expressing confidence that Petrobras' results will show improvement later this year and in 2013.

Petrobras' shares in Sao Paulo tumbled about 5% after markets opened Monday but recovered some of those losses by midday, recently trading down 1.4% at BRL19.66. The company's second-quarter loss of BRL1.35 billion represented its worst quarterly result in more than a decade.

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