Petrobras PBR, the renowned Brazilian oil company, recently announced its intention to file a request with Brazil's environmental protection agency, Ibama, seeking a reconsideration of its denial of the environmental license for drilling an exploratory well in block FZA-M-059. This block is located in the deep waters of Amapá, offshore Brazil.
The decision followed Ibama's assessment, which highlighted a range of technical inconsistencies and recommendations from analysts on the Environmental Licensing Board.
Technical Flaws and Environmental Concerns
In a report issued by Ibama, several concerns were raised regarding Petrobras' request. It pointed out discrepancies in environmental studies, inadequate measures for communicating with indigenous communities and deficiencies in PBR's plan to safeguard the region's wildlife. According to Reuters, these factors led to the rejection of the company's application.
Petrobras, however, maintains that it has fulfilled all the requirements outlined in the reference legislation for the bidding process of block FZA-M-059 and met the technical demands set by Ibama. The company asserted that its emergency response structure is the largest in the country. PBR also expressed its willingness to meet any additional demand that may be required.
Shared Responsibility and Acquisition Process
The company emphasizes that the Sedimentary Area Environmental Assessment is a policy instrument shared between the Ministries of Environment (MMA) and Mines and Energy, as outlined in Interministerial Ordinance No198/2012. The block FZA-M-59, subject to the environmental licensing dispute, was acquired during the 11th ANP Bidding Round held in May 2013.
Back then, the block granting process received favorable opinions from the GT PEG Working Group, which included Ibama, ICMBIO, and MMA. This further indicates that the technical challenges were addressed during the acquisition process.
Commitment and Potential Implications
Petrobras has made a commitment, through a bidding process, to drill eight exploratory wells in the Amapá Deep Waters region within the Foz do Amazonas sedimentary basin. The refusal of the environmental license has the potential to lead to litigation, fines and a compromised assessment of the region's energy potential. It may also impact energy security and the country's fair and safe transition toward sustainable energy sources.
The final decision regarding the environmental license for block FZA-M-059 will have significant implications for Petrobras, the region's potential energy resources, energy security and the country's energy transition efforts. The resolution of this matter will require careful consideration of all relevant factors to ensure environmental protection while promoting sustainable energy exploration and development.
Zacks Rank and Key Picks
Petrobras is a Brazilian company that explores, produces, and sells oil and gas in Brazil and abroad. It operates through various segments — Exploration and Production, Refining, Transportation and Marketing, and Gas and Power. The company also engages in prospecting, drilling, refining, processing, trading, and transporting crude oil, oil products, natural gas and other liquid hydrocarbons.
PBR currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum EPM, sporting a Zacks Rank #1 (Strong Buy), and Archrock AROC and Ranger Energy Services RNGR, each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum: EPM is worth approximately $219.16 million. EPM currently pays investors $0.48 per share, or 7.38% on an annual basis.
The company currently has a forward P/E ratio of 6.07. In comparison, its industry has an average forward P/E of 7.50, which means EPM is trading at a discount to the group.
Archrock: AROCis valued at around $1.55 billion. It delivered an average earnings surprise of 26.27% for the last four quarters and its current dividend yield is 6.06%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
Ranger Energy Services:RNGR is valued at around $183.61 million. In the past year, its shares have risen 13.8%.
Ranger Energy Services currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means RNGR is trading at a discount to the group.
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