Petrobras: This Is Not The End

seekingalpha01-29

Petrobras shares have outperformed the broader market since late August, delivering a total return of ~25% compared to ~9%.The company is expected to generate decent returns and pay dividends even in ...

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href=https://seekingalpha.com/article/4665615-petrobras-this-is-not-the-end><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Petrobras shares have outperformed the broader market since late August, delivering a total return of ~25% compared to ~9%.The company is expected to generate decent returns and pay dividends even in ...</p>\n\n<a href=\"https://seekingalpha.com/article/4665615-petrobras-this-is-not-the-end\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4581","symbol_name":"高盛持仓","start_time":0,"source_url":"https://seekingalpha.com/article/4665615-petrobras-this-is-not-the-end","article_id":"2407864894","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1453461498/image_1453461498.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2407864894","pubTimestamp":1706461200,"sourceInfo":{"source_id":"seekingalpha_hot_news","name":"SeekingAlpha"},"weMediaInfo":null,"summary":"Petrobras shares have outperformed the broader market since late August, delivering a total return of ~25% compared to ~9%.The company is expected to generate decent returns and pay dividends even in ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4581":"高盛持仓","SG9999002521.SGD":"United Global Resources A 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delivering a total return of ~25% compared to ~9%.The company is expected to generate decent returns and pay dividends even in the current environment in which oil supply is abundant.Petrobras stock remains a solid investment due to its low breakeven price, rising oil production, and undervaluation compared to peers.   Gilnature Petrobrasâ€™s (NYSE:PBR)(NYSE:PBR.A) shares continue to exceed expectations and outperform the broader market. Back in August, I published a major update on the company after initially giving it a BUY rating more than a year ago, where I stated that most of the political risks that hammered the stock in the past were overblown and a bright future awaits the company. Since that time, Petrobras has delivered a total return of ~25% against the broader market return of ~9%, and there are reasons to believe that the Brazilian oil & gas major will continue to exceed expectations in the future. While investors are trying to adapt to the new oil environment in which supply is abundant despite the latest OPEC+ production cuts, this article aims to highlight the reasons why Petrobras will likely be able to thrive in such an environment despite the latest depreciation of oil prices to which it is greatly exposed. The Party Continues Petrobras is expected to release its Q4 earnings results in March, and we will likely see a decent report since the company has more than enough opportunities to generate impressive returns in the current environment and continue to pay dividends to its shareholders. The latest earnings report for Q3 that was released back in November showed that despite the decline in revenues by 21.2% Y/Y to $25.55 billion due to the lower oil prices, the company managed to generate an impressive $5.46 billion in net income. Considering that the oil prices in Q4 were similar to Q3, it makes sense to believe that Petrobras will continue to generate decent returns in the following quarters despite the abundance of supply on the global market. Thatâ€™s one of the main reasons why Petrobras remains a solid investment at the current levels. Even though the EIA predicts the average price of Brent crude oil in 2024 and 2025 to be around $80 per barrel, thatâ€™s still enough for the company to stay profitable. After all, Petrobrasâ€™s breakeven price in the base case scenario is around $55 per barrel, while some of its newest projects could have a breakeven price of as low as $20 per barrel. Therefore, while the earnings and revenues in Q4â€™23 and Q1â€™24 are likely to be down Y/Y due to the fact that the disruptions to the oil market that happened in 2022 were mostly an anomaly, the company still has a bright future. There are several reasons to believe that Petrobras would be able to show a decent performance in the following quarters if not years. Letâ€™s not forget that the Brazilian government is aiming to become the worldâ€™s fourth-biggest producer of oil by the end of the decade, which would make it possible for Petrobras to expand its upstream business in the following years. Thatâ€™s also why it makes sense to believe that some of the lost revenues caused by the declining oil prices will be mitigated by the rise in production, which in Q3 alone increased by 8% Y/Y to 3.98 million barrels of oil per day. Itâ€™s likely one of the main reasons why we saw an uptick in upward revenue and earnings revisions in recent months. Considering all of this, it makes sense to believe that Petrobras is a solid company to own at this stage. Whatâ€™s more, is that the companyâ€™s stock appears to also be a decent dividend and value play at the same time. Currently, Petrobras has a forward yield of ~8.9%, which is significantly higher in comparison to its American peers such as Exxon Mobil (XOM) and Chevron (CVX), which have a forward yield of only ~3.7% and ~4%, respectively. At the same time, Petrobras has a forward P/E of ~4x, while Exxon Mobil and Chevron both have a forward P/E of ~11x, which indicates that the Brazilian company could be undervalued in comparison to other major energy names. Whatâ€™s more is that in addition to being a better dividend and value play, Petrobrasâ€™s shares have also outperformed its American and international peers in the last year, which could suggest that it is a much better overall energy investment in comparison to others. 1-year performance of Petrobras's shares in comparison to its peers (Seeking Alpha) Major Risks To Consider While Petrobras appears to be a decent dividend O&G play at the moment, the company still faces several challenges that could undermine the bullish thesis in the long run. While in the past Iâ€™ve stated that most of the political risks associated with Petrobras were overblown back in late 2022 when the current administration of President Lula was elected, thereâ€™s a possibility that over time the government decides to strengthen its grip over the company. Last year Petrobras already approved a new policy that lowered diesel prices in the domestic market, and then in December lowered the prices once again, which prompted analysts to believe that more cuts are on the way. At the same time, earlier this month the company announced the planned expansion of its renewables business which is likely not going to be as profitable in comparison to its oil operations. Whatâ€™s more is that under the updated CapEx plan, the company is expected to spend $11.5 billion on investments in low-carbon and decarbonization projects, which is twice as much in comparison to the previous plan. Some of those moves and projects were more than likely lobbied by the current Brazilian administration since the Brazilian government remains the biggest shareholder of the company. While they donâ€™t pose a major danger to Petrobrasâ€™s overall business, a potential strengthening of the governmentâ€™s grip over the companyâ€™s affairs could end badly over time. The Bottom Line  Petrobras is mostly a pure O&G play thatâ€™s greatly exposed to the volatility of the oil market. This is the main reason why it makes sense to analyze mostly the macro issues that have one of the greatest impacts on the performance of its business and its shares. At the same time, even though other O&G majors are exposed to the same developments, there are reasons to believe that Petrobras is a much better investment in comparison to them due to its undervaluation and a greater dividend yield. Thatâ€™s why even though weâ€™re unlikely to see the return of oil prices to the 2022 highs anytime soon, Petrobras is likely to continue to generate decent returns even in the current environment where oil supply is abundant thanks to its low breakeven price and fairly limited risks for now.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2407864894"}