Petrobras (PBR) Considers Increasing Stake in Braskem to Aid Sale
Petrobras PBR, the state-run Brazilian oil giant, is currently navigating a complex landscape as it explores strategic options amid growing controversies surrounding its petrochemical subsidiary, Braskem. According to recent developments, Petrobras is considering increasing its stake in Braskem in order to facilitate a sale to foreign buyers.
The Braskem Spotlight Intensifies
The spotlight on Braskem has intensified due to the ongoing investigations linked to the sinking ground in Maceio, Alagoas state, where the company operates rock salt mines. Evacuations in affected neighborhoods have been underway since 2018, raising concerns about the environmental and operational practices of the petrochemical producer.
Political Involvement and Key Discussions
Insiders familiar with the matter revealed that discussions regarding Petrobras' potential stake increase in Braskem were brought to light during a high-profile meeting involving key political figures — Brazil’s president Luiz Inacio Lula da Silva, speaker of the House Arthur Lira and senator Renan Calheiros. The discussions included considerations of Petrobras contributing additional resources to strengthen its position for a potential sale to international buyers.
According to a source close to the discussions, president Lula said, “If Petrobras needs to contribute additional resources to strengthen its position for purchase by international funds, that's the move."
ADNOC's Offer and Petrobras' Dilemma
In November, an Abu Dhabi-based oil company, ADNOC, presented an offer to acquire a stake in Braskem from conglomerate Novonor (formerly Odebrecht). Petrobras, currently holding 36.1% of Braskem's total capital and 47% of its voting capital, has preferential rights to purchase Novonor's stake. Additionally, Petrobras has the option to tag along in the ADNOC deal and sell its stake.
Due Diligence and Strategic Deliberations
PBR responded to inquiries by emphasizing that it is actively conducting due diligence on Braskem "for the possible exercise of tag along or preemptive rights in the event of the sale of the shares held by Novonor." As Petrobras' management and board of directors deliberate on the strategic moves, the situation remains volatile.
The unfolding saga between Petrobras and Braskem has captivated the industry's attention, with investors eagerly awaiting the resolution of this intricate situation. The Brazilian oil giant's potential stake increase in Braskem and the involvement of international funds add a layer of complexity to the unfolding narrative.
Conclusion
Petrobras stands at a key juncture as it navigates the complexities surrounding its petrochemical subsidiary, Braskem. The environmental and operational challenges faced by Braskem, coupled with political discussions and international offers, contribute to the intricate landscape that Petrobras must navigate. The strategic decisions made by Petrobras in the coming days will undoubtedly shape the future of both companies and leave a lasting impact on Brazil’s oil industry.
Zacks Rank and Key Picks
Currently, PBR carries a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like The Williams Companies WMB and Murphy USA Inc. MUSA, each sporting a Zacks Rank #1 (Strong Buy), and Archrock, Inc. AROC, carrying a Zacks Rank #2 (Buy) at present. You can seethe complete list of today’s Zacks #1 Rank stocks here.
The Williams Companies is valued at $42.66 billion. The company currently pays a dividend of $1.79 per share, or 5.1%, on an annual basis.
WMB, the U.S.-based energy infrastructure company, operates through Transmission & Gulf of Mexico, Northeast G&P, West and Gas & NGL Marketing Services segments.
MUSA is worth $7.7 billion. In the past year, its shares have risen 22.6%.
MUSA is involved in the marketing of retail motor fuel products and convenience merchandise. It operates retail gasoline stores, principally in the Southeast, Southwest and Midwest United States.
Archrock, Inc. is valued at $2.5 billion. AROC currently pays a dividend of 62 cents per share, or 3.88%, on an annual basis.
AROC is a U.S.-based energy infrastructure company that designs, sources, owns, installs, operates and maintains natural gas compression equipment for the oil and natural gas industry.
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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report
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