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To: elmatador who wrote (170904)	7/19/2012 10:48:34 AM
From: not_prudent	Respond to of 206121

Pre-salt<$40 for PBR. or so they say... laht.com

To: elmatador who wrote (170904)	7/19/2012 11:28:17 AM
From: architect*	5 Recommendations Read Replies (2) \| Respond to of 206121

$45 / bbl is operating (lifting) costs for ultra deep. Compared to operating costs of $12 / bbl for conventional on-shore. $45 / bbl is a guess. I use $45 / bbl for capital investment costs of deep water West African prospects. On a billion bbl oil field in deep water $45 billion is capital investment is required prior to first production. Now add in on-going operational, corporate and finance costs. You need to calculate the all-in costs, exploration, development, operating, corporate, financial, capital investment, and so on. Petrobras is trading at about the same price as before making the string of ultra deep oil Santos and Campos discoveries ...Tupi, Jupiter and so on. As you know interest rates are very high, so their is a considerable amount of financing costs going forward. Petrobras financial model uses $95 / bbl, so you have to assume oil prices below $95 / bbl are a deal breaker. In areas of the world with 6% corporate debt costs, the industry discounts 10% (NPV 10%). In Brazil with higher interest rates you'd have to 20% for the financial cost of money. Petrobras's capital expenditures are exceeding market expectations, which is in part why Petrobras share price is lower than before making the string of billion barrel discoveries. My assumption is $90 / bbl break even - 20% discount (10% industry standard) , so - 10%, and - 20% contingency for cost overruns. That's $115 - $120 /bbl forward strip. First produuction is when, eight years from now. If oil is at $90 /bbl in 2020, I'd guess, Petrobras will not be showing a net- net - net profit on each pre-salt barrel produced in 2020 at $90 /bbl. Petrobras has commissioned many resource and development reports that provide financial analysis and estimated costs. It shouldn't be hard to review and understand the financial modeling in one of those reports. The point is - on-shore Brazil projects cost $20 / bbl in Capex + $12 / bbl in OpEX + $10 / bbl in transportation + $4 / bbl in G&A + $4 /bbl financial cost + $15 / bbl in taxes + $15 / barrel in royalties. On -shore oil prospects have an all-in costs of $80 /bbl. With $90 / barrel forward strip this financial model would have a NPV 10% of ~ $10 /bbl in value. Economies of scale come into play for Petrobras, especially if the flow rates / well are very high + 10k bopd.