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Petrobras (PBR) Misses 2018 Production & Divestment Targets

Zacks Equity Research

Petróleo Brasileiro S.A. or Petrobras PBR recently released 2018 production numbers, which unfortunately fell short of expectations. The Brazilian oil giant recorded a total production of 2.63 million barrels of oil equivalent per day (MMBoe/d), below the company’s forecast of 2.7 MMBoe/d. Further, the company’s domestic oil output came in at 2.03 million barrels per day (Bbl/d), lower than its expectation of 2.1 million Bbl/d. While the company’s assets disposal program shored up its financials to some extent, it has certainly affected the production volumes.

On an encouraging note, the company recorded a 3.3% monthly increase in production figures in December 2018. The total output in the said period amounted to 2.7 MMBoe/d, of which around 98% comprised domestic production. The increase in output is attributed to the interconnection of new wells in the Tartaruga Verde field and Campos Basin. Further, the culmination of maintenance outage in Sapinhoa and Marlim fields aided last month’s output numbers.

Notably, the year 2018 marked the start-up of four new production platforms for Petrobras, namely P-74, P-75 and P-69 in the pre-salt Santos Basin and FPSO Cidade de Campos dos Goytacazes in the post salt Campos Basin.

Per its ambitious five-year plan (2019-2023), the company intends to boost average production in 2019 to 2.8 MMBoe/d, with 5% average annual growth till 2023. The plan will be supported by the 13 new platforms that are coming online by 2023. Petrobras is entering into various strategic partnerships with foreign oil giants to drive exploration momentum. In this regard, the company has inked deals with major players like TOTAL S.A. TOT, Royal Dutch Shell plc RDS.A and Equinor ASA EQNR.

Nonetheless, the recent weakness in crude prices along with its involvement in the Operation Carwash scandal, which impacted the leverage metrics, remain major overhangs for this Zacks Rank #5 (Strong Sell) company. As it is, we are discouraged by the fact that Petrobras failed to meet its $21-billion divestment target for 2017-2018 and barely managed to come up with asset sales worth $7.5 billion within the said time frame. Now with Branco at the helm, it will be interesting to watch if the company can meet its production and divestment targets this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Petroleo Brasileiro S.A.- Petrobras Price


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