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Petrobras (PBR) May Divest Offshore Assets to Reduce Debt
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According to a recent Bloomberg report, Brazil’s state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) is in the process of negotiation with Karoon Gas Australia Ltd. regarding the sale of two offshore oil fields. The divestment is being viewed as the company’s strategy to generate proceeds to pay for its huge debt load.
Petrobras will likely sell 100% stake of Bauna field located in the Santos Basin as well as 50% stake in Tartaruga Verde situated in the Campos Basin. Bauna currently develops almost 45,000 barrels per day, whereas Tartaruga Verde is now in the early phases of development.
Notably, Petrobras plans asset sales of as much as $15.1 billion for 2015–16. The company intends to raise an additional $19.5 billion through divestments and partnerships between 2017 and 2018. Petrobras also projects divestitures worth $40 billion over the next 10 years. Through these sales, the company intends to reduce debt and exit from non-core businesses like biofuels, fertilizers and petrochemicals to focus on the most profitable deep water projects.
We appreciate Petrobras’ massive asset sale program as its involvement in a multibillion dollar money laundering scam has not only tainted its goodwill but has also made it difficult for the company to raise money from both debt and equity markets to pay off its debt. Hence, we are optimistic about Petrobras’ asset divestment program.
In such a scenario the OPEC’s recent decision to curb oil production is highly favorable for Petrobras. This is because the OPEC’s unexpected production cut amid an oversupplied commodity market will likely help recover oil prices. This improvement in the crude front will help the company to generate significant cash flows after selling oil at higher prices. Other energy majors that are poised to benefit from the increase in crude prices include Royal Dutch Shell plc , BP plc (BP - Free Report) and Exxon Mobil Corporation (XOM - Free Report) .
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Petrobras (PBR) May Divest Offshore Assets to Reduce Debt
According to a recent Bloomberg report, Brazil’s state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) is in the process of negotiation with Karoon Gas Australia Ltd. regarding the sale of two offshore oil fields. The divestment is being viewed as the company’s strategy to generate proceeds to pay for its huge debt load.
Petrobras will likely sell 100% stake of Bauna field located in the Santos Basin as well as 50% stake in Tartaruga Verde situated in the Campos Basin. Bauna currently develops almost 45,000 barrels per day, whereas Tartaruga Verde is now in the early phases of development.
Notably, Petrobras plans asset sales of as much as $15.1 billion for 2015–16. The company intends to raise an additional $19.5 billion through divestments and partnerships between 2017 and 2018. Petrobras also projects divestitures worth $40 billion over the next 10 years. Through these sales, the company intends to reduce debt and exit from non-core businesses like biofuels, fertilizers and petrochemicals to focus on the most profitable deep water projects.
We appreciate Petrobras’ massive asset sale program as its involvement in a multibillion dollar money laundering scam has not only tainted its goodwill but has also made it difficult for the company to raise money from both debt and equity markets to pay off its debt. Hence, we are optimistic about Petrobras’ asset divestment program.
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In such a scenario the OPEC’s recent decision to curb oil production is highly favorable for Petrobras. This is because the OPEC’s unexpected production cut amid an oversupplied commodity market will likely help recover oil prices. This improvement in the crude front will help the company to generate significant cash flows after selling oil at higher prices. Other energy majors that are poised to benefit from the increase in crude prices include Royal Dutch Shell plc , BP plc (BP - Free Report) and Exxon Mobil Corporation (XOM - Free Report) .
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>