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Caiman Valores
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Caiman Valores is a Colombian based independent investment analytics and risk management consultancy. The consultancy specializes in South American listed companies as well as conducting regional economic and risk assessments. The consultancy is currently located in Colombia. The principal of... More
  • Petrobras Already Admits It Needs Fuel Prices To Rise To Fund Its Investment Program 2 comments
    Jun 19, 2012 12:09 AM | about stocks: PBR

    With the Petrobras share price in a tailspin and investors becoming even more concerned about the direction of the Brazilian economy it was hoped the company's new investment plan would be good news for investors. However, there was a gaping financial hole in this plan, how was it to be funded in light of falling oil prices and the unwillingness of the Brazilian government to increase gasoline prices. Now the CEO of Petrobras Maria das Gracas Foster has admitted gasoline prices will need to rise if the company's investment plan is to proceed.

    Clearly at current prices Petrobras in unable to fund the program, which is the world's largest corporate investment program. Whether the Brazilian government will increase domestic gasoline prices is a considerable unknown.

    To date the Brazilian government has made it clear that with restarting the domestic economy and controlling inflation being priorities combined with the intimate connection between transport prices and gasoline prices that a gasoline price rise is out of the question. This becomes even clearer when it is considered that oil prices are falling and that the Brazilian economy has slowed to recessionary levels.

    However, if Petrobras is unable to execute the program it will be unable to access the pre-salt reserves. This is something the government wants more than ever as a means of funding its social programs and catapulting Brazil to the status of being an international oil power.

    Whatever the end result, it is evident that the interest of Petrobras share holders is far from the minds of the government's and company'skey decision makers.

    Disclosure: I am long PBR.

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  • vireoman
    , contributor
    Comments (1107) | Send Message
     
    Hey, cool new pic. Less artsy, more prehistoric. As for PBR, you've already talked me out of it. Good luck with your holding.
    19 Jun 2012, 12:36 AM Reply Like
  • Caiman Valores
    , contributor
    Comments (1645) | Send Message
     
    Author’s reply » vireoman, thank you for comments on the new look, I am glad that you like it. I thought given that were in a bear market a more prehistoric look would be appropriate. I wonder if we'll ever see a Caiman market?

     

    Petrobras is appearing to be more and more like a stock that runs on a boom bust cycle linked to the Brazilian economy. Plus with the Brazilian economy slowing significantly and the government intervening more heavily than ever in the economy it can only have a knock on effect for investors.

     

    Out of all the oil majors my preference is Chevron or Ecopetrol (I am sure everyone knows by now my infatuation with Ecopetrol). I also quite like Chevron's exposure to Latam and believe that its non-conventional reserves strategy will pay-off over the long run.
    19 Jun 2012, 12:49 AM Reply Like
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