Petrobras To Divest Amazonas Basin Assets, Seeks Buyers

Brazil's state-run energy giant Petróleo Brasileiro S.A. or Petrobras (NYSE:PBR) recently announced plans to take bids for its entire interest in the Azulão Field in Amazonas state. The transaction is in sync with the company’s strategy to reduce its debt load.

The natural gas produced in Azulão will be used to fuel a plant, which is expected to become operational in 2019. We would like to remind investors that the company obtained long-term power purchase agreements for the 102 megawatts thermoelectric plant in 2014 at an auction. The Tucuruí-Macapá-Manaus transmission line, which has been operational since 2013, connects the Azulão facility with the national grid.

Potential Bidders

The company has issued a teaser comprising essential information about the opportunity and the criteria for the selection of potential buyers. According to the teaser, companies with experience in exploration and production in the proposed region or having at least 200 megawatts thermal power capacity will be preferred in the selection process.

Reason for the Sale

The company is divesting its assets to overcome the corruption scandal it was involved in and to generate funds to reduce debt. In fact, the company expects to garner $35 billion from asset sales. Of this, the company has already sold assets worth $13.6 billion since Jan 2015. Petrobras expects to generate the remaining $21 billion over the next two years.

About the Company

Petrobras is the largest Latin American integrated company. It is involved in the exploration, production, refining, retailing and transportation of petroleum and its byproducts, both domestically and internationally. The company is headquartered in Rio de Janeiro.

Price Performance

Petrobras belongs to the Zacks categorized Emerging Markets Integrated industry. Its shares gained 12.85% over the last one month compared with the broader sector’s increase of 6.22%.

Zacks Rank and Stocks to Consider

Petrobras presently has a Zacks Rank #3 (Hold). Some better-ranked stocks in oil and energy sector are Alliance Holdings GP, L.P. (NASDAQ:AHGP) , Canadian Natural Resources Ltd. (TO:CNQ) and SunCoke Energy, Inc. (NYSE:SXC) . All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alliance Holdings’ sales for the current quarter are expected to increase 5.07% year over year. The company recorded a positive average earnings surprise of 18.04% in the last four quarters.

Canadian Natural Resources’ sales for the current year are expected to increase 45.59% year over year. The company recorded a positive earnings surprise of 30.77% in the first quarter of 2017.

SunCoke Energy’s sales for the current year are expected to increase 10.58% year over year. The company had a positive earnings surprise of 120% in the first quarter of 2017.

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