RIO DE JANEIRO, Jan 15, 2007 (Dow Jones Commodities News via Comtex)
Domestic oil and gas reserves of Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, remained almost stable in 2006, but overseas reserves fell due to write-offs in Venezuela.
Petrobras' Brazilian oil and gas reserves receded slightly to 10.573 billion barrels of oil equivalent, or BOE, on Dec. 31, 2006, from 10.578 billion BOE a year earlier, according to the strict criteria of the U.S. Securities and Exchange Commission, or SEC, the company said in a release Saturday.
Of the domestic reserves, 9.002 billion barrels were from oil, Petrobras said.
Its 2006 domestic oil and gas reserves would last for 14.9 years at current production levels, the company said.
Petrobras' domestic reserves replacement ratio was 99%, meaning that Petrobras replaced each barrel produced with 0.99 barrel of new reserves.
Merrill Lynch said in a report Monday that in accordance with the SEC criteria, Petrobras only showed a "mere reserve replacement."
"While this may be better than many international companies are able to report, it is likely to be viewed with at least some disappointment by Petrobras observers," Merrill said.
The bank added in its report that Petrobras' three-year domestic replacement still stood at a "respectable 108%."
Petrobras shares rose 0.44% to BRL45.35 ($1=BRL2.141) at 1747 GMT on the Sao Paulo stock exchange, compared to a 0.33% increase in the Ibovespa stock index.
Merrill also said that Petrobras' exploration program continues to be very successful, but that it appears to take more time than previously thought before potential new reserves are incorporated into proven reserves to the extent that total reported reserves begin to rise.
Petrobras said its Brazilian production reached 705 million BOE in 2006, while it incorporated 700 million BOE as new domestic oil and gas reserves during the year.
The SEC demands, among other requirements, that oil companies have firm oil sale contracts for new fields to be considered company reserves.
The company's domestic and overseas reserves combined fell 2.7% to 11.458 billion BOE at the end of 2006, from 11.775 billion BOE a year earlier.
With that, Petrobras' overall reserves replacement ratio was 60% at the end of 2006. The company said its overall reserves, which include domestic and overseas reserves, would last 14.5 years at current output levels.
The reduction in overall reserves was due to a 26% plunge in overseas oil and gas reserves to 885 million BOE at the end of 2006, from 1.197 billion BOE a year earlier.
The massive reduction came mostly as Petrobras had to cede part of its production in Venezuela to state-oil firm Petroleos de Venezuela (PVZ.YY) in a 2006 revision of production contracts with the Venezuelan government.
The fall in overseas reserves due to the contract revision in Venezuela was "known," the Rio de Janeiro-based brokerage Brascan said in a research report Monday.
Despite the weak 2006 reserves based on the SEC criteria, Petrobras' reserves historically have been rising faster than that world oil reserves, Brascan said.
"That characteristic is certainly what makes the company stick out in comparison to its international peers," the brokerage said.
Both Brascan and Merrill maintain their "buy" rating for Petrobras.
International reserves will increase in the future once new reserves in Nigeria and Bolivia enter more advanced stages of development, Petrobras said.
Also, according to the less strict criteria of the Society of Petroleum Engineers, or SPE, Petrobras' 2006 Brazilian reserves actually rose by 3.9% to 13.753 billion BOE at the end of 2006, from 13.232 billion BOE a year earlier.
The SPE also accepts as reserves areas in earlier stages of development.
The increase came as the company incorporated new discoveries into its reserves, among them the Maromba field in the Campos Basin and the Catua field in the Espirito Santo Basin.
Petrobras also incorporated discoveries into nearby producing fields, among them the Mexilhao gas field in the Santos Basin.
According to the SPE criteria, Petrobras' overseas reserves fell 24% to 1.27 billion BOE at the end of 2006 from a year earlier.
The firm's combined domestic and overseas reserves according to SPE criteria rose to 15.023 billion BOE at the end of 2006, from 14.913 billion BOE at the end of 2005.
Copyright (c) 2007 Dow Jones & Company, Inc.
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