Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Mega Auction a Flop? Petrobras Investors Are Doing Fine, Thank You

Stock Markets Nov 08, 2019 04:26PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

(Bloomberg) -- Brazil’s largest-ever sale of oil prospects frustrated those waiting for strong dollar inflows and cast doubt on foreign appetite for the country’s assets, but state-controlled Petroleo Brasileiro SA’s investors seem unfazed by the auction’s outcome.

Preferred shares of the oil giant -- which initially sold off on the view that the bigger-than-expected bid for the Buzios field would hurt the company’s ongoing deleveraging process -- are up more than 3% since the auction, while Petrobras’s $2.75 billion of bonds due 2028 are little changed in the period.

“The auction result was positive for Petrobras,” Credit Suisse (SIX:CSGN) Group AG’s Regis Cardoso wrote in a Nov. 7 report. “Buzios is one of the very best pre-salt fields, with proven high productivity wells and low breakevens,” said Cardoso, who has an outperform rating for the company’s American depositary receipts.

Banco Bradesco BBI, Citigroup (NYSE:C) and Banco Itau BBA also reiterated buy-equivalent ratings for the stock, calling the oil giant’s investment accretive, offsetting a higher cash expenditure. Asset-management firm Dogma Capital said this week’s event doesn’t change its bullish view for Petrobras. Most importantly, analysts say, the lack of participation by oil majors isn’t necessarily a sign of bad capital allocation.

“There was a significant asymmetry in favor of Petrobras in the auction,” Cardoso wrote, citing the compensation to be paid to Petrobras for investments it has already made. “The company already operates in these areas and taking the surplus volumes allows for many synergies with the existing operations.”

Petrobras’s Chief Executive Officer Roberto Castello Branco said in an interview that regulatory uncertainties and the amount of money bidders would have to commit upfront were the culprits for the absence of most major oil companies. He said the firm can develop the Buzios field it won on its own without compromising financial discipline. Even though Petrobras needs to pay $17 billion by year-end just in licensing fees, leverage levels “will stay fairly stable” in the fourth quarter compared with net debt at 1.96 times Ebitda in the third quarter, he said.

“While the investment is more expensive and impacts Petrobras’s ability to cut down debt in short term, the asset is pretty good,” said Ray Zucaro, the chief investment officer at RVX Asset Management in Miami. “At the end of the day, the company is acquiring assets in one of the more premium areas,” said Zucaro, who owns Petrobras shares.

Mega Auction a Flop? Petrobras Investors Are Doing Fine, Thank You
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email