Petrobras Intends to Divest 10% Interest in Libra Oil Field
Petroleo Brasileiro S.A. or Petrobras PBR is planning to divest up to one-fourth of its 40% interest in the Libra oil field − located off the coast of Rio de Janeiro, Brazil − for $1.5 billion, going by Reuters. This reflects the company’s intention to lower its huge load of debt, the highest in the entire oil industry.
After getting involved in a multibillion-dollar money laundering scandal last year and being downgraded by rating agency Moody’s Investors Service, it has been hard for Petrobras to raise money both in the debt and the equity markets. Hence, selling assets is one of the options to raise money and pay back its debt. According to the sources, the company is now planning to fetch as high as $15 billion by 2016 from its asset disposal program.
It is to be noted that the Libra field will likely produce first oil by the first quarter of 2017. As per the estimate of the government of Brazil the field has a recoverable reserve of 8 billion to 12 billion barrels of oil equivalent.
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company boasts healthy production growth and has announced several important discoveries of late. Additionally, loans from China should offer some relief considering Petrobras’ huge debt burden and the money-laundering scandal, which has scarred its credit metrics.
However, much is yet to be achieved considering the firm’s scale of operations and investment base. Adding to the problems is the currently weak commodity price environment. With crude prices anticipated to remain weak in the near future, the company’s revenues and earnings are expected to remain stressed.
As a result, Petrobras carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Murphy USA Inc. MUSA, Ferrellgas Partners LP FGP and Boardwalk Pipeline Partners, LP BWP. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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