Shares in Spanish oil company Repsol YPF SA (REP) outperformed the Madrid market early Tuesday after the announcement of commercial viability and the existence of 550 million barrels of oil equivalent, or BOE, in oil and gas reserves at Brazil's Piracuca field.
Repsol rose 2.4% to EUR14.21 at 0748 GMT, while the IBEX-35 index rose
1.5%. Repsol (REP) holds 37% in the BM-S-7 block off the coast of Sao Paulo that contains Piracuca. Brazil's government-controlled energy giant Petroleo Brasileiro SA (PBR), which holds a 63% operating stake, had made the announcement Monday night.
Recoverable reserves at the field pale when compared to other recent Brazilian discoveries such as Tupi in the Santos Basin, which is estimated to hold up to 8 billion barrels of oil equivalent. But Piracuca is nevertheless a valuable mid-sized find, BPI analyst Pablo Pena-Rich said. "It's quite positive for Repsol, especially as the find is above the salt layer, which makes production cheaper," he said.
The find could add an upside of 4.5% to Repsol shares, Pena-Rich said. BPI has a EUR16.55 target and a hold recommendation for Repsol.
Piracuca lies at a water depth of only 200 meters, compared to about 2,000 meters for most sub-salt layer deposits, which also lie several thousand meters deeper below the sea bottom.
Piracuca lies about 200 kilometers off the city of Santos in Sao Paulo state.