Tuesday, August 19, 2008

Soros Loads Up Petrobras



Petrobras: Buy and Sit Tight Like Soros.

As reported at Bloomberg.com, George Soros purchased an $811 million stake in Petroleo Brasileiro SA (PBR), (better known as Petrobras) in Q2. The Brazilian oil company is now the largest holding in his fund, amounting to 22 percent of the total $3.68 billion of stocks and American depositary receipts held by Soros Fund Management LLC. Of course, crude oil has taken a dive in the last month, helping to push Petrobras down 28 percent since his purchase and costing Soros $235 million. I guess we would all like to be in a position to lose nearly a quarter billion dollars and still be "OK". Then again, if Soros holds tight, he could end up doing well.

While the timing for Soros may not be perfect for this trade, a number of other people are also betting on Petrobras. As quoted by Ricardo Kobayashi from UBS Pactual SA: "Petrobras has something that other oil companies don't have: oil - lots of it and they're going to find more. If you can buy now and hang on, if you have the staying power, it's great.''

As written in a previous post , estimates have the Tupi-area fields in Brazil costing between $200-$240 billion to develop, in part due to deepwater rigs causing $600,000 a day to rent, forcing Petrobras to look for capital. Yet the cost might eventually be worth it given that the offshore fields are expected to hold up to 50 billion barrels. Petrobras has already leased approximately 80% of the deepest-drilling offshore rigs (see post). The company is also buying new rigs and production platforms.

If oil prices stabilize, companies to consider would be Transocean (RIG), Nobel (NE), and Nabors (NBR), each of which have sold off with lower crude prices, but each of which are also near some key support levels. For longer-term investment, some capital-intensive E&P oil companies such as Exxon Mobil (XOM) should do well, even without direct investment. Of course, this all requires crude oil to stabilize, probably stay over $100 a barrel, and potentially continue its march higher. If not, you may be experiencing the short-term returns of Soros, and not necessarily the longer-term ones.
And I'm not even going to make any Communist jokes about Soros or Lula.

4 comments:

Anaconda said...

George Soros is a patron of progressive causes. Soros is also a shrewd investor that has been very successful. Certainly, when it comes to his own investments he's as clear eyed and hard headed as any other investor in the market.

So George Soros has invested a substantial sum of money into Petrobas.

And, yes, Petrobas, right now, is the leader in the deepwater, deep-drilling exploration of oil & gas.

As has been argued here previously in detail, the oil out on the continental margin that Petrobas has been exploring for is inconsistent with "fossil" theory.

Petrobas has made major oil finds off the coast of Brazil. Bloomberg: 500 degree, Fahrenheit oil where "pipes that can carry oil at temperatures above 500 degrees Fahrenheit (260 Celsius) and drill bits that can penetrate layers of salt more than one mile thick."

And this:

"These discoveries are in very deep water, and once you get to the seabed they are very deep under the floor, with a layer of salt that is definitely a difficult barrier.'' "

and further:

"Uncharted Depth

Pumping oil from the Brazilian finds, parts of which are 32,000 feet (10,000 meters) below the ocean's surface, will require boring almost twice as far down as the world's deepest producing offshore well."

The Bloomberg news article and the above quotes from that article provide scientific evidence that specifically contradicts the "oil window" corollary to the fossil theory, which states oil deeper than 15,000 feet deep breaks down into methane gas because of the heat. 500 degrees Fahrenheit greatly exceeds the temperature the "oil window" says oil can exist at.

Some have said I am stating this oil is Abiotic only because I say so.

But look at the scientific evidence.

Make your own judgment: Is the offshore Brazil oil consistent with "fossil" theory. Was a shallow sea ever that deep below the sea floor in that location? What about the temperature of the oil? And so on.

Please make your best case why or how this oil is consistent with "fossil" theory.

Take all the space you need.

Getting back to Mr. Soros, he's a shrewd investor, does he know something about these oil finds others don't? Is there potential to make more large finds off the Brazil coast?

What about the American coasts?

That could start soon.

If Mr. Soros is seriously investing in this company and it's methods, surely, some people should sit up and take notice.

Anaconda said...

Michael D. Lewan is a member of the United States Geological Survey.

"I don't think anybody has ever doubted that there is an inorganic source of hydrocarbons." -- Michael D. Lewan, 2002

"No one doubts that inorganic hydrocarbons may occur in association with hydrothermal systems." -- Michael D. Lewan, 2005


The above quotes taken seperately are pretty clear, but put them together and it makes it crystal clear Mr. Lewan, as a published member of the USGS, is convinced that Abiotic Oil exists.

The relevant question is the amount of hydrocarbon production?

Mr. Lewen, tends to the view that these "amounts" are relatively small.

But if the hydrocarbon process exists, as Mr. Lewen states, what is the limiting factor? Because we know eruption of volatiles and other minerals can be robust.

Hydrocarbons, as a volatile, would take its place in proportion with all other volatiles, and minerals known to be associated with hydrothermal, volcanic, and tectonic activity.

As hydrogen and carbon are present in the upper mantle in various mineralogical formations, and the atomic and electron structure of the two respective elements result in a chemical affinity between each other for thermo-molecular bonding as a function of ultra-high heat and pressure in the mantle in accord with general laws of mineral formation.

A limiting factor, as such, needs to be cited to explain the postulate that abiotic hydrocarbon production is confined to small amounts.

Otherwise, physical observations of oil consistent with principles of Abiotic Oil and contradicting fossil theory lead to the conclusion there is no, as such, limiting factor, and, therefore, what is acknowledged as happening on a small scale (hydrocarbon formation), happens on a larger scale, too.

Consistent with principles of the Law of Fluid Dynamics, that chemical motions, kinetics, are scale independent.

Louis Hissink said...

Hello Guys,Great blog - just found it.  Jack Kenney's gas resources web site is down, incidentally.You can see read my latest on www.henrythornton.com under the Hissink File

Contrarian Profits said...

How Brazil’s PetroBras (PBR) Could Deliver Cuban Oil to U.S.