Brazil Oil & Gas Jrs: Model Update

Research evidence excerpt

Brazil Oil & Gas Jrs: Model Update

Milene Clifford Carvalho AC Latin America Equity Research

(55-11) 4950-3475 27 July 2026 J P M O R G A N

milene.carvalho@jpmorgan.com

Investment Thesis, Valuation and Risks

PetroReconcavo (Neutral; Price Target: R$13.00)

Investment Thesis

We rate PetroReconcavo Neutral. PetroReconcavo operates as a pure onshore oil and gas

company, offering a simpler operational profile but with more limited growth prospects. In

recent years, the company has focused on delivering consistent operational performance,

yet has struggled to unlock meaningful growth opportunities. Despite this consistency,

PetroReconcavo’s hedging strategy has restricted its ability to fully benefit from the recent

surge in oil prices. Combined with comparatively weaker growth and cash flow generation,

these factors result in a less compelling investment case relative to PRIO.

Valuation

Our revised December 2026 price target of R$13.0/sh, from R$14, is derived using an

average discount rate of 14.3% (nominal R$) andand 1P reserves from the company’s

certification report. Additionally, NPV of abandonment provision (according to company

reports) is discounted directly from the enterprise value.

Risks to Rating and Price Target

Operational risk: reserves or production curve below (above) our estimates. An

important parameter to our financial estimates is how the company will develop its oil and

gas reserves. We base our forecasts on historical data allied with certification report

guidelines for production, opex, and capex. If the company fails (surprises) to deliver the

expected production curve or the certification agency revises downward (upward) reserves

and associated parameters, we could see downside (upside) risk to our valuation.