After completing significant funding transactions to finance acquisitions of assets from Petroleo Brasileiro S.A. (Petrobras; BB/Stable), independent oil and gas companies in Brazil are challenged to deliver the operational and financial results investors expect. Operating performance expectations for these companies are largely summarized in their reserves certifications, which are important inputs for modeling rating scenarios. Fitch Ratings compared the forecasts of the latest certifications issued by four companies that operate exclusively in Brazil: Petro Rio S.A. (Prio; BB–/Stable), 3R Petroleum Oleo e Gas (3R; A[bra]/Stable), Enauta Energia S.A. and PetroReconcavo S.A. Among these, only 3R operates in the midstream and downstream segments.

Analysis of the group’s reserves certifications demonstrates the degree to which integrating acquired assets will support the companies’ production profiles, operating efficiency and marketing conditions through upcoming years. These companies operate in the revitalization of mature fields and face challenges in continuing to expand the scale of their operations to maintain attractive margins, especially amid declining oil prices. This industry is consolidating, which can support the credit profiles of these companies by offering gains in scale, greater asset diversification and potential operational synergies, although opportunities might be limited.
Source: Fitch Ratings