Brazil's state-run energy giant Petroleo Brasileiro S.A. or Petrobras (NYSE:PBR) is reportedly planning to auction its stakes in its Japanese unit on the tropical island of Okinawa.
Per Bloomberg, this sale is expected to draw interest from several companies, including JX Holdings Inc. and TonenGeneral Sekiyu K.K. At least seven companies, including Tokyo-based refining company, Cosmo Energy Holding, have shown interest in the auction for Nansei Sekiyu K.K, which operates under the Japanese subsidiary of Petrobras. This oil refinery has a capacity of 100,000 barrels of oil equivalent per day.
Petrobras, like its peers, Exxon Mobil Corp. (NYSE:XOM) and Royal Dutch Shell (LON:RDSa) Plc RDS.A is on track to exit the Japanese markets. This is because the demand for oil products in the nation is expected to decline by 8.4% over the next five years.
The company, which is knee-deep in a corruption scandal, had purchased 87.5% stake in the Japanese unit from TonenGeneral for $52 million in 2008. It acquired the remaining 12.5% stake from a diversified corporation Sumitomo Corp. in 2010.
Petrobras, with more than $130 billion in long-term liabilities, is the most indebted energy company in the world. Hence, the company is focusing on massive asset divestitures to reduce its debt and strengthen its balance sheet.
With the last few years turning out to be challenging for oil companies across the globe, Petrobras is taking initiatives to stabilize its financial performance. Petrobras plans to raise roughly $15.1 billion through asset sales by the end of 2016. The company plans to raise as much as $2 billion by divesting its offshore oil and gas fields. It has also entered into a $1.4 billion deal to spin off assets in Chile and Argentina.
Headquartered in Rio de Janeiro, Petrobras is one of the largest energy players in Latin America. Currently, the company carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.
A better-ranked player in the energy sector is McDermott International Inc. (NYSE:MDR) . The stock sports a Zacks Rank #1 (Strong Buy).
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