Petroleo Brasileiro Petrobras SA (PBR) repels oil service companies because of the difficulty and uncertainty in the contract-renewal process, raising questions about how the company will increase production while acting as a political machine, says Trey Stolz, Managing Director of Oilfield Services Research for IBERIA Capital Partners.
“As Petrobras misses production targets and apparently needs to get those levels up, the question is how and where they’ll be able to do that. It seems lately that service companies are shying away from Brazil somewhat, with the uncertainty and the difficulty they have in renewing contracts with Petrobras because of the quasigovernmental nature of working with that NOC,” Stolz said.
Oil service companies are having a difficult time navigating the red tape and political issues in Brazil, as the normal process of renewing a contract or day rate increase does not work the same there as in other regions. These companies are moving assets out of the country despite the attractive market and the likelihood of a long run of activity in the future.
“You’ve seen Hornbeck (HOS) move four of their 12 OSVs out of Brazil back to the Gulf. I think you’re going to see more of that. You’ve seen Tidewater (TDW) continue to retire boats out of Brazil,” Stolz said. “For Brazil to come around as a region, you need political change, and that will probably take a couple of years. It appears that Brazil needs to revisit how they do their contracts in order to attract service companies and keep the activity going.”
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