Credit Suisse Comments Halt Rally In Petroleo Brasileiro SA

Barely a day goes by without talking heads recommending the stock of Petroleo Brasileiro SA (PBR-NYSE), a play on the Carioca field 170 miles off the southeastern coast of Brazil.

Dennis Gartman just pitched the stock on Fast Money, bulls claim PBR's 45% ownership stake in the field should prove to be one of the biggest windfalls in energy history, and Carioca is being called the biggest discovery outside of the Middle East.

Maybe:

Brazil's Carioca prospect may have 98 percent less crude than a figure cited by the country's oil agency, Credit Suisse Group said, challenging claims that the field is the biggest-ever discovery outside the Middle East.

Haroldo Lima, director of Brazil's National Oil Agency, sent shares of Petroleo Brasileiro SA and other Carioca stakeholders higher when he said April 14 that the offshore field may hold 33 billion barrels of oil. That figure is ``way off the mark,'' Mark Flannery, a Credit Suisse analyst in New York, said today on a conference call with clients. Bloomberg

Credit Suisse is estimating the reserves closer to 600 million barrels than 33 billion barrels. What gives?

Lima told Brazilian lawmakers yesterday that he obtained the estimate of 33 billion barrels from a publication called World Oil. Petrobras, as state-controlled Petroleo Brasileiro is known, said it needs at least three months to determine how much oil can be recovered from Carioca.

Merrill Lynch and Citigroup are joining the bullish side of the ledger, with the latter speculating that field could supply enough oil to keep every refinery in the U.S. busy for two years.

But the stock did not participate in the stock market rally today; Brazilian officials are planning to investigate the claims. We have not heard the last of the controversy; and with additional, potentially large prospects in the offshore block, bulls will no doubt keep hope alive. As the Credit Suisse analyst admitted, ``A lot of exploration and delineation is going to need to take place, we are very early in the process here.’’

The hot money chasing (PBR) took the day off, but shareholders might want to strap themselves in for a slippery ride.

Brazil Field Smaller Than Claimed, Credit Suisse Says
Bloomberg
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