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There are 2 articles on this stock available only to PRO subscribers.
- Petrobras (NYSE: PBR) reported consolidated oil and gas production in its home country and abroad of 2 million 795 thousand barrels of oil equivalent per day.
- The Brazil based company reported revenues for Q2 FY 2014 of $36.9 billion, up by a slim margin of almost 4% from $35.6 billion in the year ago quarter.
- Normalized diluted earnings per share for the quarter amounted to $0.17 per share as compared to $0.23 per share in the second quarter of 2013.
- Earnings have been hurt by subsidies on Brazil’s fuel prices. Finances are under pressure as it now has to borrow in order to fund its investments of $237 billion.
- With 3rd quarter earnings looking set to miss analysts’ estimates as well, investors would currently be better off by avoiding investment in Petrobras.
Petrobras Default Probabilities Drop 0.14% But The Firm Still Tops Bond Volume Rankings
- Petrobras one-year default probabilities dropped 0.14% to 1.55% Wednesday, but the firm still was the most actively traded issuer in the U.S. market with $323 million in trading volume.
- Five of the 20 most heavily traded bond issues were Petrobras bonds, led by $94 million in the bonds due in 2021. All five issues traded more than $30 million.
- Vale and Cliffs Natural Resources also had bond issues in the top 5 by trading volume.
- Petrobras faces a perfect maelstrom of headwinds.
- The company has not cleared up the billion dollar corruption issue which continues to linger.
- Petrobras also faces the double whammy of falling oil prices and a leftist government in power.
- This Brazilian stock has fallen by 45% this year, but still does not look cheap.
Scandal Drives PetroBras To Most Actively Traded Bond Issuer Rank
- PetroBras was the most actively traded issuer in the U.S. bond market on Tuesday, with 856 trades in 9 issues for $309 million in volume.
- Six of the eight most heavily traded bond issues in the market place were PetroBras bonds.
- The most actively traded bond was the January 2021 issue with more than $109 million in volume. GECC had the most actively traded U.S. issue with $30 million in volume.
Not Much Reason To Own Petrobras Following Dilma Election Victory
- Incumbent Brazilian President Dilma Rousseff hung on to defeat challenger Aecio Neves 51-49 in this month's presidential election.
- Fuel companies operating in Brazil like Petrobras have struggled greatly under the Dilma regime as fuel price caps have prevented companies from selling their products at competitive market prices.
- With Dilma's re-election, it's expected that these restrictive business conditions will continue and the stock should be avoided.
Petrobras Reports Increases In Production From Brazil - Is This A Sign Of Hope For The Company?
- Petrobras’ production from Brazil rose by 0.8% in the month of September and amounted to 2,781 thousand barrels of oil equivalent per day.
- The reason behind this remarkable increase in total production in Brazil stems from the launch of six new offshore wells in the Santos and Campos basis.
- Oil demand forecasts have been cut by the IEA, which indicates that oil prices are likely to decline in the future as oil demand remains weak.
- The results of the second quarter showed that the company suffered from declines in its margins, even though revenues for the company increased.
- The 52 week range for share prices is $10.20-$20.94. The 1 year estimate for share prices is at $18.55.
Dilma's Re-Election Sparks Sell-Off In Petrobras, But I Am Still Not Buying
- Dilma Rousseff won Brazil’s presidential election by a narrow margin, sparking a huge selloff in Petrobras shares.
- Although Petrobras shares have fallen to around $11 and appear attractive in-terms of valuation, the stock is a value trap due to the company’s uncertain outlook.
- Petrobras might be allowed to raise gasoline prices a few times but the price cap is not likely to be removed completely, which is bad news for the company.
- Petrobras has struggled in recent years as its refining unit has made losses due to the Brazilian government’s cap on fuel prices.
- The outcome of the Brazilian election could possibly decide Petrobras’ future.
- However, Petrobras’ is not worth the risk even if pro-business Aceio Neves wins Sunday’s election.
- Strong undervaluation with P/B of 0.28.
- Government is the main reason why Petrobras has lost over $230 billion in equity value since 2009.
- Coming elections could bring a wave of change. Is it just hopeful dreaming?
- We present the first-round results of the Brazilian presidential-elections 2014.
- We describe the effects that we expect from the results on PBR's price.
- We conclude that it is too early to expect a substantial and lasting positive effect for Petrobras.
Petrobras Has Dug Out Good News From Sergipe-Alagoas Basin
- New natural gas discovery should add to Petrobras’ reserves. This is one of a series of discoveries that the company has managed to make in the same region.
- The company announced positive Q2 results recently. And analysts rated the stock as ‘hold’ before the gas discovery.
- The earnings per share and revenues are expected to increase in the future. Those looking for a long-term investment would find a window of opportunity with Petrobras.
Petrobras: Why It Is Looking At A Potential 50% Upside Now
- We describe the effects past elections had on PBR's share price.
- We formulate expectations about the company's performance for the upcoming election.
- We conclude that recent developments might carry a 50% upside potential.
- Already repeatedly unable to meet production and financial goals, the falling price of crude and weak product markets both at home and abroad continue to plague this SuperMajor.
- Scandal, bribes, kickbacks, inefficiencies and government policy of this captive national oil company are boiling forth faster than they can be headlined.
- Brazil's elections are swinging strongly towards socialist Marina Silva. She has indicated an intention to curb Petrobras, decrease focus and reliance on oil and gas and redirect national treasure elsewhere.
- The government's majority stake is both a blessing and a curse for Petrobras.
- The company has shown above average growth in revenues.
- The shift towards local oil would reduce the adverse impact of fuel price controls.
- Brazilian elections pose an opportunity for gasoline/diesel Prices in Brazil to return to parity.
- Petrobras appears to be undervalued, based on its P/B, EV/EBITDA, and EV/EBITDAX metrics/multiples.
- Petrobras has found some success with extracting oil from its pre-salt reserves, with significant projected increases in oil production from these reserves over the next few years.
- Despite the fact that Petrobras missed analysts’ estimates in the second quarter earnings report the company’s fundamentals are intact.
- The company plans to invest $153.9 billion mainly to develop pre-salt and post-salt production during 2014-2018.
- The company is positioned to produce 3.2 million barrels of oil per day by the end of 2018 and 4.0 billion of oil per day during 2020 to 2030.
- Currently the Brazilian government has an approximate 54 percent stake in the company making it a state-sponsored monopoly without any real competition.
- In the recently published article on Forbes.com, Mike Koza, a prominent investor, sees the company’s potential doubling in four years.
Petrobras Would Make The Most Of Brazil's Escalating Natural Gas Demand
- PBR has extended its agreement with Bolivian state-owned firm YPFB, which would continue to supply natural gas to a thermoelectric power plant in Brazil.
- With Brazil’s southeast traversing its worst drought in nearly half a century, the role of PBR becomes extremely prominent.
- Growth in hydrocarbon production coupled with the national grid’s increasing electricity demand, provide the Brazilian oil and gas giant the ideal opportunity to bolster its revenue numbers.
- Petrobras has world-class reserve and resource potential, but it might be too much to digest.
- The company's debt levels are at wildcat E&P levels, without the balance sheet strength of other supermajors.
- Petrobras has been used as a piggy-bank by the Brazilian government; will this ever end?
- Petrobras will not go bankrupt if the Brazilian economy or oil prices slide but the debt will get uncomfortable attention.
- The stock has run up on expectations that a new government will be more pro-shareholder friendly, but wait for a better opportunity down the line.
Fri, Nov. 21, 2:57 PM
- Petrobras (PBR +11.7%) says it has launched regular operations at its Cidade de Ilhabela offshore platform at the Sapinhoa field in the Santos Basin offshore Brazil.
- The facility can produce up to 150K bbl/day of oil and compress up to 6M cm/day of natural gas.
- Sapinhoa field production started in Jan. 2013 via an interconnecting well.
- PBR is the operator and owns a 45% interest, while BG Group (OTCPK:BRGXF, OTCQX:BRGYY) holding 30% and Repsol (OTCQX:REPYY, OTCPK:REPYF) 25%.
Fri, Nov. 21, 10:06 AM
- Petrobras (PBR +7.2%) and Vale (VALE +9.6%) surge higher in anticipation that Brazil may appoint a new market-friendly finance minister today, perhaps signaling a shift away from the leftist, interventionist policies blamed for Brazil's stagnant economic growth in recent years.
- One of three reported finalists for the job is University of Chicago-trained Joaquim Levy, CEO of Bradesco Asset Management, an arm of Banco Bradesco (BBD +4.9%); he is considered a fiscal hawk who helped Brazil obtain its investment credit grade in a previous stint at treasury secretary.
- The other contenders are said to be central bank president Alexandre Tombini and Nelson Barbosa.
- Also: ITUB +3.8%, BSBR +2.9%, GOL +4.6%.
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, BRZS, DBBR, FBZ
Thu, Nov. 20, 4:48 PM
- Brazil’s central bank has frozen ~$18M in assets of suspects in connection with a broad investigation into alleged embezzlement at Petrobras (NYSE:PBR).
- The federal investigative judge leading the probe had asked the central bank to freeze up to 20M Brazilian reais ($7.8M) for each of 16 suspects and three companies.
- The central bank action is the latest development in the widening scandal that has engulfed Brazil’s largest political parties and some of its biggest companies.
Wed, Nov. 19, 11:45 AM
- Petrobras (PBR +0.7%) could write off the value of its assets by as much as $8B (21B Brazilian reais) and cut dividends as a result of the ongoing investigation into alleged graft and money laundering, Morgan Stanley analysts say.
- The firm is placing its price target for PBS's U.S.-traded shares under review and is reassessing earnings estimates as a consequence of the scandal.
- If probes extend for longer than expected and further evidence of wrongdoing is presented, PBR could also face restricted access to funding that could force the company to ramp up debt or look for an equity issuance, Stanley adds.
- Earlier: Brazil official says alleged Petrobras corruption scheme could reach $1.6B
Wed, Nov. 19, 9:16 AM
- The alleged corruption scheme involving kickbacks from contracts at Petrobras (NYSE:PBR) may have totaled as much as $1.6B, or 4B Brazilian reais, according to the head of the country’s budget watchdog.
- The value includes money allegedly overcharged on contracts involving the purchase of a refinery in Texas and the construction of a petrochemical complex in Rio de Janeiro state and three refineries in other locations in Brazil.
- "This case is the biggest corruption scheme... in terms of the financial amount involved and also regarding the huge number of people involved,” the head of Brazil’s Court of Accounts tells WSJ.
Tue, Nov. 18, 4:46 PM
- Brazilian police reportedly have obtained a confession from one of several executives arrested since last week on suspected involvement in a massive corruption investigation around Petrobras (NYSE:PBR).
- The confession is the first to become public from a group of construction companies that allegedly participated in a kickback and money laundering scheme described in testimony by a former PBR exec who was arrested earlier this year.
- Nevertheless, shares bounced off 52-week lows to finish the day with a 1% gain.
- Earlier: Petrobras down again as investigation deepens
Tue, Nov. 18, 10:16 AM
- Another day, another 52-week low for Petrobras (PBR -2.8%) as Brazilian officials are now investigating builders’ ties to alleged corruption at the company, according to a Bloomberg report.
- Police issued 27 arrest warrants, including top executives from builders, and undertook 11 searches at company offices; police say they have found strong evidence that at least seven builders formed a cartel to win public contracts, including a combined 59B reais ($23B) in orders from PBR.
- “Recent scandals surrounding Petrobras’ contracting practices could have a negative implication for the company’s effectiveness in negotiating with equipment suppliers as its executives will likely exercise incremental caution when signing or amending contracts,” Fitch Ratings says.
Mon, Nov. 17, 3:15 PM
- In her first public comments since the arrests of several people including a top company executive last week, CEO Maria das Gracas Foster says Petrobras (PBR -6.3%) will use the widening corruption scheme to improve governance, in part through creation of a compliance department.
- Foster says the formation of the new department has the board of directors’ full support and would be made operational as soon as possible, but remains in the planning phase.
- PBR also says Q3 earnings would not be released until Dec. 12 to allow more time for an internal investigation, and that data would not to be revised if corruption allegations prove true.
- Earlier: Petrobras to miss 2014 oil production target
Mon, Nov. 17, 9:59 AM
- Petrobras (PBR -1.9%) cuts its 2014 production growth outlook to 5.5%-6%, below the previously targeted 7.5% annual output increase, due to delays on platform deliveries and licensing processes.
- The missed target comes despite a 9% Y/Y increase in oil production to 2.09M bbl/day during Q3, PBR's ninth straight month of higher production.
- PBR also says its access to capital markets is restricted because of the delay in its audited Q3 earnings report amid the corruption probe.
Mon, Nov. 17, 4:25 AM
- Petrobras (NYSE:PBR) will speak with investors and analysts and then meet with reporters starting at 8 a.m. ET over its failure to release its audited third-quarter financial results due to a widening corruption scandal.
- Investors are also concerned that Petrobras risks a technical default on about $12B dollars in bonds if it doesn't report audited earnings by the end of the year.
- Previously: Another former Petrobras exec arrested in corruption probe
- Previously: Petrobras again delays Q3 earnings release
Fri, Nov. 14, 11:17 AM
- Petrobras' (PBR -6%) delay in posting quarterly results may breach covenants on at least $11B of bonds should the company fail to release the information by the end of the year, according to a Bloomberg report.
- Clauses on PBR’s bonds, including $3.5B in notes due 2023, require the company to publish an unaudited and consolidated balance sheet 90 calendar days after the end of each quarter, with a 60-day grace period.
- PBR shares are trading at 52-week lows; its notes due 2023 recently traded at $0.904 on the dollar, pushing the yield to 5.8%.
Fri, Nov. 14, 7:52 AM
- Another former Petrobras (NYSE:PBR) executive has been arrested as part of an investigation into a broader corruption scandal that has rocked Brazil.
- Police arrested Renato Duque, former director of engineering and services who left the company in 2012 as part of a management shakeup; 26 others also were arrested.
- Duque is the second former top PBR exec arrested this year; police arrested the company's former director of downstream operations earlier this year while investigating an alleged money laundering operation.
- PBR -7.6% premarket following an earlier report that it has again delayed its Q3 earnings release.
Thu, Nov. 13, 7:10 PM
- Petrobras (NYSE:PBR) says it will not meet a Friday deadline for reporting its Q3 earnings, and expects to release unaudited “accounting information relative to the third quarter” on Dec. 12.
- When there is a date for the release of formally audited results, PBR says it would notify the market 15 days in advance.
- The company “is not ready” to release earnings because of internal and external probes into corruption allegations, adding that it is considering accounting adjustments based on the accusations.
Wed, Nov. 12, 11:49 AM
- Petrobras (PBR +1.1%) says its total oil and gas production in Brazil and elsewhere reached 2.795M boe/day in October, up 0.5% from September and a new quarterly record.
- Oil production in Brazil rose 0.4% from the previous month to 2.126M bbl/day, also a new record and the ninth straight month of increasing output.
- Most of the increase came from the ramp up of two platforms at the Roncador field and one platform at the Whale Park field; both fields are located in the offshore Campos Basin, which holds more than two-thirds of PBR's total proved hydrocarbon reserves in Brazil.
Tue, Nov. 11, 5:07 PM
- Petrobras (NYSE:PBR) allowed suppliers in refinery projects and oil platforms to overcharge by ~$1.2B (3B reais), according to preliminary findings of a tribunal overseeing Brazilian state spending.
- The figure includes $792M in overbilling at the Pasadena refinery in the U.S. as well as surplus payments at the Comperj and Abreu e Lima plants being built in Brazil, according to the president of the TCU tribunal.
- The state-run company is being investigated in Brazil by a congressional committee, the federal police and the tribunal after a former director was arrested earlier this year for his alleged involvement in a laundering operation.
Mon, Nov. 10, 1:41 AM
- The DOJ and SEC are now investigating whether Petrobras (NYSE:PBR) or its employees got kickbacks from suppliers to grant them contracts, adding to the mounting domestic corruption probes facing the Brazilian state-controlled oil company.
- U.S. authorities are looking into whether Petrobras or its employees, middlemen or contractors, violated the Foreign Corrupt Practices Act, an anti-corruption statute that makes it illegal to bribe foreign officials to win or retain business.
PBR vs. ETF Alternatives
Petroleo Brasileiro SA Petrobras operates as an integrated oil & gas company in Brazil. Its business is structured into segments such as Exploration & Production; Refining, Transportation & Marketing; Distribution; Gas & Power; Biofuel; & International.
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