May 15, 2010 / 12:14 AM / in 9 years

UPDATE 2-Brazil's Petrobras to boost 2010 oil output 22 pct

* New subsalt production to help boost 2010 output

* Gulf of Mexico Chinook project to start up this year

* Earnings jump 23 pct on high oil prices, recovery (Recasts with production figures, adds details, background)

By Denise Luna

RIO DE JANEIRO, May 14 (Reuters) - Brazilian state oil company Petrobras on Friday said it will increase oil output by around 22 percent in 2010 as it begins ramping up production in the vast deep water subsalt fields that have drawn global attention.

Brazil this week announced two major discoveries in the subsalt region that could potentially hold more than 9 billion barrels of oil together, helping confirm the South American nation as a major new oil exploration frontier.

“This year we expect to have new (operations) that will increase production by 480,000 barrels (per day), 80,000 of which will come from the United States,” CFO Almir Barbassa told reporters.

Petrobras (PETR4.SA)(PBR.N), Brazil’s largest company by market capitalization, will add nearly 250,000 barrels per day (bpd) of production from subsalt projects that include the giant 5-8 billion barrel Tupi area.

Existing production in Tupi will increase to 100,000 bpd from its current 18,000 bpd, and Petrobras will start new operations in a different part of the Tupi region with expected output of 30,000 bpd.

The 80,000 bpd from the United States will come from the deep water Gulf of Mexico Chinook field, which is scheduled to start up in the second half of this year despite growing fallout from the massive BP oil spill there.

Petrobras also plans to begin early output at the Guara field in the third quarter of 2010, a project that in the company’s most recent business plan was slated for 2013.

This comes after Petrobras earlier this year lowered its 2010 domestic production target to 2.1 million bpd from a previous forecast of 2.25 million bpd.

The company’s total production in March was 2.14 million bpd and 2.03 million bpd in Brazil.

Production of oil and gas in the first quarter rose 3 percent from the same period a year earlier, it said on Friday. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a graphic of Brazil's major subsalt projects click: link.reuters.com/wec82j For a Graphic on Petrobras oil production, click on: link.reuters.com/daj42j For details on the Petrobras capitalization plan click:

[ID:nN12225996] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Petrobras posted first quarter net earnings of 7.73 billion reais ($4.28 billion), rising 23 percent from the first quarter of 2009 and beating analysts’ expectations that it would post net earnings of 6.64 billion reais.

“This strong result was driven by higher oil prices in international markets and growth in the production and sales volume, reflecting the economic recovery,” Petrobras said in a statement.

This helped offset lower revenues from diesel and gasoline sold within Brazil, which constitute about half the company’s revenue, after it cut fuel prices in 2009.

The company was expected to post a profit of 6.64 billion reais and EBITDA of 15.00 billion reais, according to the average estimate of five analysts polled by Reuters.

Earnings before interest, taxes, depreciation and amortization, a key cash generation indicator known as EBITDA, rose 12 percent to 15.08 billion reais from 13.51 billion reais a year earlier.

Investors have in recent months focused mostly on possible delays to a crucial oil-for-shares capitalization plan that could bring in $25 billion in new cash needed to maintain this year’s investments in exploration and production.

Brazil’s ANP energy regulator this week unveiled a 4.5 billion barrel oil find in offshore waters near existing discoveries that could be used in the capitalization plan, but the scheme is still pending full approval from Congress.

The ANP on Friday released preliminary estimates showing that a second prospect may hold even more oil than the first, helping confirm Brazil’s offshore subsalt region as a major new frontier for global oil exploration. [ID:nN14235772]

Petrobras, Brazil’s largest company by market capitalization, suffered several recommendation downgrades by stock analysts in recent weeks over uncertainty created by that plan. The company has ruled out further borrowing to fund operations. ($1=1.80 reais) (Writing by Brian Ellsworth, editing by Bernard Orr and Carol Bishopric)

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