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In addition to a 26% drop in Q3 earnings [see transcript], many investors and analysts have also been recently concerned about the heavy investment needed by Petrobras (NYSE: PBR) in the next five years, which is estimated at US$224.7B.

According to newspaper Brasil Economico, analysts Nathaniel Cezimbra and Andrea Aznar believe that these massive investment requirements add uncertainty over engineering, technology and logistics operations, in addition to being an extended burden in its debt financing (considering current adverse market conditions). Just consider that Petrobras' net debt in Q3 increased by 33.4% over Q2, reaching BR$91.7B. Thus, the two analysts at BB Investimentos will keep the state-owned company stock under review.

Many in the market believe that the high number of projects the company manages, in addition to its expansion plans, strategic guidelines, and the development of the "pre-salt" gas complex, will require high levels of management resources and sophistication by the company, risking the company loss in its operation's efficiency and profitability.

In the opposite direction, Brazilian brokerage firm Agora issued a "buy" for the preferred shares of Petrobras. Another brokerage firm, Coinvalores, is neutral on the stock, at least in the short term, and said that recent news, like the rise in prices of gas and diesel, should bring some positive bias to the performance of Petrobras' shares.

Petrobras has great prospects in its favor considering its vast oil reserves, but it remains to be seen if it will execute it well and efficiently. At least on paper, the company looks good, but investors are right to be worried.

Source: Petrobras At Risk Of Losing Efficiency, Profitability