Brazilian state-owned oil company Petrobras said on Thursday that some of its costs in a key oil-producing region plunged in the third quarter, a positive sign given that the company is making a huge bet on the region.
In a securities filing announcing its third-quarter results, Petroleo Brasileiro SA, as the company is formally known, said the cost of lifting a barrel of oil from the offshore pre-salt formation had fallen to $5.03, down 20% from the second quarter.
Petrobras is currently selling off billions of dollars of midstream and downstream assets, as well as shallow-water and onshore oilfields. It has said it will concentrate its focus and capital on the pre-salt, a vast formation where billions of barrels of oil are trapped under a thick layer of salt beneath the ocean floor.
The pre-salt is also home to what is known as the transfer-of-rights, or TOR, region, where the Brazilian government is set to auction off production rights on November 6 in a process expected to bring around $26 billion into state coffers.
Petrobras reported third-quarter net income came to 9.09 billion reais ($2.25 billion), significantly lower than the previous quarter partly because of already announced one-off charges, some of which pertained to arbitral and legal disputes.
Petrobras also benefited from billions of dollars in divestments in the second quarter, making for a difficult comparative base.
However, third-quarter margins largely came in line with the consensus. Adjusted earnings before interest, tax, depreciation and amortization stood at 32.6 billion reais, a touch above UBS analysts' estimate of 32.3 billion reais.
In management comments, Petrobras said it benefited in the quarter from the privatization of its former fuel distribution unit Petrobras Distribuidora SA, as well as an already announced boost in oil and gas production.
The company also reiterated its focus on divestments. It said it will receive non-binding offers for four refineries - RNEST, RELAM, REPAR and REFAP - in November, in a process expected to rake in billions of dollars.
($1 = 4.04 reais)
(Reporting by Gram Slattery; Editing by Christian Schmollinger and Leslie Adler)