ADRs of Brazilian state-run energy giant Petroleo Brasileiro SA or Petrobras (PBR) continued to soar yesterday after the stock surged 13% on Monday. Yesterday, Petrobras ADRs gained over 4% on the NYSE to close at $16.46. This marked increase was the result of a favorable outcome from the first round of voting in the Brazilian presidential elections.

During the first round of voting last Sunday, incumbent Dilma Rousseff − whose price control measures hurt Petrobras’ revenues and earnings – got 41.6% of the votes. However, challenger Aecio Neves also got substantial support from 33.6% of the voters and is seen gaining in popularity. Brazilian Socialist Party presidential candidate Marina Silva, on the other hand, got 21% votes.

Since any presidential candidate of the country must secure more than 50% of the votes to win the polls, Dilma Rousseff and Aecio Neves will have to contest again on Oct 26.

Petrobras’ stock price rallied on the news as its investors were pleased with the significant support that Aecio Neves got during the first round of voting. The business community believes that Aecio Neves will help Brazil to come out of its present economic downturn.

The stock also got a boost from Petrobras’ announcement of an oil discovery in the Espírito Santo Basin. The discovery was made through the well 3-BRSA-1253D-ESS or 3-ESS-219D, commonly known as Pudim.

The discovery well is situated 121 kilometers offshore Espírito Santo, in the Brigadeiro Discovery Evaluation Plan (PAD.V) area, at a depth of 1,886 meters. The well had reached a depth of 3,550 meters.

Petrobras − the operator of the project − has 65% ownership in the consortium developing the PAD region. Shell Brasil Petróleo Ltda – a wholly owned subsidiary of the European oil major Royal Dutch Shell plc (RDS.A) – holds 20% while the remaining 15% is held by Inpex Petróleo Santos Ltda.

Currently, Petrobras carries a Zacks Rank #5 (Strong Sell). However, one can look at better-ranked players in the energy sector like Northern Oil and Gas Inc. (NOG) and Ocean Rig UDW Inc. (ORIG). Both the players sport a Zacks Rank #1 (Strong Buy).

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