Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) recently announced that it struck a strategic collaboration with Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and the announcement led to an uptick on the stock.
“Petrobras reports that has signed, today in Holland, a Memorandum of Understanding (MoU) with Shell Exploration Company (West) B.V., a Royal Dutch Shell subsidiary, to establish a mutual long-term collaboration, with operational focus, in assets which are already operated in partnership between the two companies,” stated the press release regarding the partnership.
The strategic partnership involving the signing of a Memorandum of Understanding (MoU) that will facilitate the development of pre-salt fields in Brazil. The announcement of the partnership seems to have encouraged investors because the shares of Petrobras gained by 1.84 percent to close at $9.98 on the same day of the announcement. This suggests that the investors took the partnership as a positive step for the company.
The strategic partnership will allow the two firms to bring their resources together to boost operational efficiencies for well construction as well as aviation safety and logistics. One of the main takeaways for Shell is that it will benefit from Petrobras’ successful cost-cut initiative and management expertise. Petrobras, on the other hand, will benefit from Shell’s technical knowhow in technology as well as its expertise in deepwater markets.
The partnership between the two companies will be valid for the next five years, after which the contract will most likely be renewed. The two companies are working together in 10 production and exploration projects and each is active in five blocks. The two oil firms will form a committee that will oversee the operational and development process.
The partnership was also announced just after Shell’s acquisition of BG Group. The company also intends to carry out more investments in standardized deep-water vessels in Brazil over the next three years. The additional investments have been facilitated by the fact that Brazil recently amended its oil industry laws to make way for more investments.
Petrobras stock closed the latest trading session on Tuesday at $9.89.