Petroleo Brasileiro SA PBR.A, one of the largest integrated energy firms in Latin America, is in talks with Pampa Energia PAM to sell its 67.2% of stake in subsidiary, Petrobras Argentina. Shares of Petrobras gained more than 8% after the announcement, whereas those of Pampa fell.
Pampa Energia,the largest electricity company in Argentina, has offered about $1.2 billion to purchase the stake. Petrobras’ board of directors has approved negotiation with Pampa Energia for a period of 30 days. However, the companies may engage in talks for an additional 30 days, if required.
The negative impact of the oil price slump and changes in management because of this Brazilian energy behemoth’s corruption scandal, have resulted in the company’s dwindling operating cash flows and return on equity. It has also exposed the company to high debt management risk. Petrobras sees selling its stake in the Argentine subsidiary as a means to improve finances and to meet debt obligations of about $130 billion.
The deal is expected to close within two months, and if completed, this will be one of the first major deals in Petrobras' eight-month old plan to sell assets worth $15.1 billion by the end of this year.
Headquartered in Rio de Janeiro, Petrobras boasts healthy production growth and has announced several important discoveries, of late. Petrobras Argentina owns assets that include a refinery, gasoline stations, drilling rights for several oil and gas fields and stakes in electricity companies.
Petrobras sports a Zacks Rank #1 (Strong Buy), implying that the stock will outperform the broader U.S. equity market over the next one to three months.
Other favorably placed players in the energy sector are SunPower Corporation SPWR and Braskem S.A. BAK. Both these stocks also sport a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PETROBRAS-ADR P (PBR.A): Free Stock Analysis Report
BRASKEM SA (BAK): Free Stock Analysis Report
SUNPOWER CORP-A (SPWR): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research