Petrobras has published a statement to repudiate media reports claiming that the company was seeking to sell a ownership in its petroleum distribution business.
Petroleo Brasileiro Petrobras SA has informed its shareholders that it has no plans to sell ownership in its petroleum marketing and distribution business, as per reports by local media.
As the oil company witness the biggest corruption disgrace in the company, attached with an extended slump in crude oil prices, it has planned to cut its exploration activities whereas reducing its 4220 billion of capital expenditure plan. As Petrobras seeks to retain cash, it has also announced a plan to divest its assets, which is most likely to generate around $13.7 billion by the end of the next year.
Media reports specified the plan of asset divestment involves shares in the fuel marketing company's business that has flourished recently as it relished broader refining margins. As per reports by O Globo, a local news-paper, the company has decided to sell 10% to 30% of its petroleum marketing division, by offering additional equity on the Sao Paul0 St0ck Exchange.
The company, while rejecting the media reports said, "There is no divestment decision related to the asset Petrobras Distribuidora."
Petrobras Distribuidora is the largest petroleum market and distribution of the country. With over 7,900 services station in the Brazil, it has around market share of 30%.
The plan of asset divestment was launched to support the company generate funds while the crude oil prices continues to decline. Over the last one year, oil prices have dropped by almost 40%, Brent oil future is currently trading at around $60.30. Declining prices of crude oil have damaged the profitability of the oil industry, especially for key business operations.
As well as tumbling oil prices, the company also witnesses a corruption disgrace. Earlier in March 2014, Brazil prosecutors alleged the company's ex-officials of involvement with construction companies, to influence the public contract values.
Petrobras has already lost around $2.05 billion in the form of overpayments, as mentioned in its 4QFY14 earnings report last month. Participation in corruption has caused rating downgrade for the company, as in February its investment grade status was downgraded. The Brazilian oil company is the largest indebted energy firm in the world, with over $100 billion in debt.
Petroleo Brasileiro Petrobras share is down approximately 39.71% over the last year, which is weighed by twenty two analysts. 12 of them rated it as Hold, 5 assigned Sell rating and 5 suggested Hold rating to the stock. It has twelve month average stock price target of $9.81 reflecting 13.5% of upside potential in contrast with $8.64 closing price on Friday May 29.