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Petrobras (PBR) Faces Pressure to Reconsider Asset Sales

Petróleo Brasileiro S.A. – Petrobras PBR, the Brazilian state-run oil and gas company, has been facing pressure from the government to reconsider its asset sales strategy. The company's board of directors has recently stated that it would be open to changing its policy on asset sales if the new management deems it necessary. However, any decision would be made based on the company's strategic plan.

The Importance of Asset Sales

Asset sale is common among companies looking to raise capital, reduce debt, or streamline operations. This practice is key to Petrobras’ financial performance, as it has been struggling with a massive debt load for several years.

Navigating the Government Request

The Brazilian government has requested PBR to sell some of its assets to reduce debt and generate revenues. However, the company needs to navigate this request carefully in order to avoid any negative impact on its operations and financial stability.

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In a filing with the Brazilian securities regulator, Petrobras clarified that its review would not affect divestments that have already been finalized or are in the closing phase. However, the Mines and Energy Ministry has requested the company to reassess its standing.

The government's push for Petrobras to reconsider its asset sales policy is part of a broader strategy to bolster the country's struggling economy. Brazil has been hit hard by the COVID-19 pandemic, and the government is looking for ways to raise revenues and stimulate growth.

PBR has been selling off its non-core assets as part of a larger effort to reduce its debt load and improve financial performance. The company's divestment plan has been a key part of its strategy to refocus on its core oil and gas business.

However, the government is skeptical about Petrobras selling off assets too quickly, at marginal prices. The Mines and Energy Ministry has requested PBR to reassess its divestment plan and reconsider selling assets that are strategically important to the company’s future.

Petrobras has sold its interest in 12 onshore exploration and production fields — the Remanso Cluster, in the state of Bahia — to PetroRecôncavo. The agreement, worth $7.3 million, was inked in 2020 and finalized by PetroRecôncavo. The sum is in addition to the $4 million received by Petrobras when the sale deal was signed. The deal has a $30 million overall consideration. After the deal’s completion, Petrobras is expected to receive $5 million from PetroRecôncavo.

PBR's asset sales strategy is a delicate balancing act. On the one hand, the company needs to raise funds to repay its debt and invest in its core business. On the other, it needs to be careful about not selling assets that are critical to its long-term success.

In conclusion, Petrobras is facing pressure from the government to reconsider its asset sales strategy. While the company is open to making changes if necessary, any decision will be made in accordance with its strategic plan. This suggests that Petrobras is committed to finding a solution that maintains a balance between its short-term financial needs and long-term strategic goals.

Petrobras, headquartered in Rio de Janeiro, is a globally renowned Brazilian oil and gas company. It engages in various energy-related activities such as oil exploration, production, refining, trading, and transportation of oil, natural gas and other fluid hydrocarbons.

Zacks Rank and Key Picks

Currently, Petrobras carries a Zacks Rank #3 (Hold). Investors interested in the energy sector might look at some better-ranked stocks like NGL Energy Partners NGL, sporting a Zacks Rank #1 (Strong Buy), and Liberty Energy LBRT and Ranger Energy Services RNGR, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NGL Energy Partners: The company is worth approximately $367.70 million. Its shares have increased 19.5% in the past year.

NGL is a limited partnership company that operates a vertically-integrated propane business with three segments — retail propane, wholesale supply and marketing, and midstream.

Liberty Energy: The company is valued at around $2.28 billion. It delivered an average earnings surprise of 81.53% for the last four quarters and its current dividend yield is 1.55%.

LBRT currently has a forward P/E ratio of 3.76. In comparison, its industry has an average forward P/E of 11.60, which means the company is trading at a discount to the group.

Ranger Energy Services: The company is valued at around $242.99 million. In the past year, its shares have decreased 4.7%.

RNGR currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means the company is trading at a discount to the group.

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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report

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