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Petrobras (PBR) to Resume Asset Sales on Court's Verdict

Zacks Equity Research

Brazil’s federal accounting court (or TCU) recently lifted its suspension order on the state energy giant Petróleo Brasileiro S.A. or Petrobras PBR that put a pause on its asset divestiture program. The news brought relief to the company as the suspension order had posed a severe threat to its aim of mitigating the huge debt that it has incurred.

Per the verdict, the company will have to begin the process of selling all the assets it had planned to divest all over again, excepting two. The other assets will be sold under the new rules revised by the TCU which are expected to bring about transparency in future asset sales.

The two assets which Petrobras will be able to divest without any further ordeals include the rights to operate the Baúna and Tartaruga Verde offshore oil fields, and a share of Petrobras' deepwater rights in the Gulf of Mexico.

A Quick Recap

The sale of assets is part of Petrobras’ divestiture program of 2015–2018. The company had intended to raise $15.1 billion by the end of 2016 and is on track with its target of raising $21 billion in the next two years. These divestment plans are in sync with the company’s strategy to reinstate investors faith in the stock.

However, Petrobras’ aim to revive its financial health through the divestment program had hit a legal snag when the TCU had suspended all divestments of the company. The state-run oil company was prohibited from signing any new asset sales while the TCU reviewed the divestment procedures.

 Petrobras’ divestments came under scrutiny because of the reported discrepancies in transactions and its failure to comply with the regulations. The court believed that the company should have been more transparent in its dealings with ample disclosure of business information. Thereafter, Petrobras had taken necessary steps to follow the court’s recommendations for improvement.

Zacks Rank and Key Picks

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm operating in the exploration, refining, marketing, transporting, distribution and biofuels segments. The company currently carries a Zacks Rank #4 (Sell).

The company has underperformed the Zacks categorized Oil & Gas Emerging Markets Integrated industry quarter to date. During the aforesaid period, shares of Petrobras declined almost 6.6% while the broader industry fell around 3%.

Better-ranked players in the broader industry include Semgroup Corporation SEMG, Antero Resources Corporation AR and Pioneer Natural Resources Company PXD. All the three companies sport a Zacks Rank #1 (Strong buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Semgroup reported positive average earnings surprise of 79.10% in the trailing four quarters.

Antero Resources reported positive earnings surprise in each of the preceding four quarters, the average being 239.10%.

Pioneer Natural Resources is expected to deliver year-over-year growth of 1119.4% in its earnings in 2017.

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Petroleo Brasileiro S.A.- Petrobras (PBR): Free Stock Analysis Report
Semgroup Corporation (SEMG): Free Stock Analysis Report
Pioneer Natural Resources Company (PXD): Free Stock Analysis Report
Antero Resources Corporation (AR): Free Stock Analysis Report
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