Petroleo Brasileiro Petrobras ( PBR ), the Brazilian integrated energy company, is slated to release its financial results for its September quarter of 2017 after the market closes on 13th November 2017(( Petrobras To Announce September Quarter 2017 Results , 27th October 2017, www.petrobras.com)). The market expects the company to post a strong improvement in its top-line as well as bottom-line driven by higher production and better price realization during the quarter. We have a price estimate of $10 per share for the company, which is in line with its current market price.
See Our Complete Analysis For Petrobras Here
Key Trends Witnessed In 3Q’17
- According to its latest production report, Petrobras has seen a rise in its domestic crude oil as well as natural gas production in the September quarter as the operations of its FPSO Cidade de Itaguaí and FPSO Cidade de Maricá in the Lula fields resumed operations. Further, the company also saw an uptick in its international oil production during the quarter. This is likely to result in a rise in the company’s 3Q’17 revenues.
- During the quarter, Petrobras signed an agreement with Norwegian company Statoil to work together to increase reserves in deep water mature fields, with an initial focus on the post-salt area of Campos Basin. The two companies are already partners in ten blocks that are currently in exploration phase in Brazil. This deal will further enhance their strategic relationship, and deliver long term benefits for both the companies.
- In order to de-lever its capital structure, Pretrobras has pre-paid $1.28 billion, renegotiated $1.6 billion, and refinanced $300 million of its existing long term debt. Given that the company has a large amount of debt on its books, the move, albeit small, could help in improving its capital structure in the long term.
- Also, Moody’s has recently updated Petrobras’ corporate debt rating from B1 to Ba3, changing its outlook from positive to stable. The credit rating agency cited significant improvement in the company’s liquidity and leverage profile, sound management discipline, and improving corporate governance as the reasons for this update. Although the company has a long way to go before it reaches the investment grade rating, the company’s efforts to optimize its balance sheet and cash flows are reaping fruits in the desired direction.
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