Petroleo Brasileiro S.A. (PBR) is Brazil's national oil company. The Brazilian government owns approximately 32% of Petrobras common stock.
On November 8th, Petrobras announced its Tupi discovery which has the potential to have between 5 and 8 billion barrels of oil equivalent (BOE). Petrobras has a 65% stake in the discovery with the remaining interests being held by BG Group (25%) and Petrogal - Galp Energia (10%).
On Thursday, Citigroup upgraded Petrobras from a hold to a buy. Zacks analyst Claudio Frietas last month upgraded Petrobras from a hold to a buy.
Risks: Since the Brazilian government is Petrobras major shareholder, there is a political risk associated with this stock. Also the Brazilian Real has strengthened almost 16% versus the dollar in the past year and 50% in the past 5 years. Currency appreciation might cut into earnings especially if oil prices drop.
My Take: Petroleo Brasileiro's stock made a strong move based on Citigroup's upgrade Thursday. It seems Petrobras stock will continue its upward trend as pre-market it is up $4.00 to $112.00. If you believe oil prices will continue to be strong, Petrobras is a good stock to own based on future earnings growth due to the Tupi discovery.