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Petrobras Starts Regasification Terminal

Zacks Equity Research

Brazil’s largest integrated energy firm, Petroleo Brasileiro SA or Petrobras (PBR) has brought online its third LNG (liquefied natural gas) Regasification Terminal in the state of Bahia. The 14 million cubic meter/day terminal added the first produce to the Brazilian gas pipeline network on Jan 24.  

Construction of the Bahia Regasification Terminal (:TRBA) started in 2012 and required an investment of approximately R$1 billion.

Contribution from this new terminal has increased Petrobras’ natural gas regasification output to 41 million cubic meter/day. Previous regasification ventures of Petrobras include the terminals at Pecém and Guanabara Bay. The terminals have regasification capacity of 7 million cubic meter/day and 20 million cubic meter/day, respectively.

Petrobras believes that the increased regasification capacity would support the nation’s natural gas needs.

Petrobras’ activities include the exploration, exploitation and production of oil from reservoir wells, shale and other rocks, and in the refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities. The Brazilian state run energy major has a promising long-term outlook thanks to its strong pipeline of development projects and impressive exploration successes.

However, we believe that the company’s $237 billion five-year investment program could substantially increase its leverage and deteriorate credit metrics during the current downturn in the economic cycle. Additionally, the company’s declining production trend is a concern.

Headquartered in Rio de Janeiro, Petrobras currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked energy sector stocks such as Swift Energy Co. (SFY), Profire Energy, Inc. (PFIE) and Clayton Williams Energy, Inc. (CWEI). All these stocks currently sport a Zacks Rank #1 (Strong Buy).

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