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Petrobras (PBR) Stock Up Since Posting Q1 Earnings Beat

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The stock of Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras (PBR - Free Report) , has gained more than 22% since its first-quarter results were announced on Apr 27. The positive response could be attributed to the company’s massive surge in year-over-year profits, with help from surging commodity prices.

What Did Petrobras’ Earnings Unveil?

Petrobras announced first-quarter earnings per ADS of $1.29, beating the Zacks Consensus Estimate of $1.08 and soaring from the year-ago profit of 3 cents. The outperformance can be attributed to higher oil prices and strong downstream results, which more than offset the rising pre-salt lifting costs.

Recurring net income, which strips one-time items, came in at $8,373 million compared to just $224 million a year earlier. Petrobras’ adjusted EBITDA rose to $14,961 million from $8,906 million a year ago.

The company reported revenues of $27,189 million, which jumped 73.2% from the year-earlier sales of $15,698 million but came in slightly below the Zacks Consensus Estimate of $27,954 million due to lower oil product sales following the divestment of its RLAM refinery.
 

Petroleo Brasileiro S.A. Petrobras Price, Consensus and EPS Surprise

Petroleo Brasileiro S.A. Petrobras Price, Consensus and EPS Surprise

Petroleo Brasileiro S.A. Petrobras price-consensus-eps-surprise-chart | Petroleo Brasileiro S.A. Petrobras Quote

Coming back to earnings, let's take a deeper look at the recent performances of PBR’s two main segments: Upstream (Exploration & Production) and Downstream (or Refining, Transportation and Marketing).

Upstream: The Rio de Janeiro-headquartered company’s average oil and gas production during the first quarter reached 2,796 thousand barrels of oil equivalent per day (MBOE/d) — 80% liquids — up from 2,765 MBOE/d in the same period of 2021.

Compared with the year-ago quarter, Brazilian oil and natural gas production — constituting approximately 99% of the total output — increased 1.4% to 2,757 MBOE/d. The upside was backed by the continued ramp-up of the Carioca and P-68 platforms in the Santos Basin, plus the contribution from new post-salt producing wells in Campos Basin.

In the January-to-March period, the average sales price of oil in Brazil surged 63.5% from the year-earlier period to $93.71 per barrel. The sharp increase in crude prices, together with higher production, had a positive effect on upstream unit sales and earnings.

Overall, the segment’s revenues jumped to $19,684 million in the quarter under review from $11,666 million in the year-ago period. As far as the bottom line is concerned, despite an uptick in pre-salt lifting costs (which rose 10.8% from the first quarter of 2021 to $5.13 per barrel), the upstream unit recorded a net income of $7,955 million, more than doubling from the first-quarter 2021 earnings of $3,925 million.

Downstream (or Refining, Transportation and Marketing): Revenues from the segment totaled $24,685 million, up 76.7% from the year-ago figure of $13,973 million on higher utilization. Petrobras' downstream unit came up with a profit of $1,987 million, which compared favorably with earnings of $1,255 million in the first quarter of 2021. The surge was on account of strong domestic fuel margins.

Costs

During the period, Petrobras’ sales, general and administrative expenses were $1,477 million, 21% higher than the year-ago period. Selling expenses also rose from $948 million a year ago to $1,178 million. However, these increases were largely offset by sharp declines in exploration costs and other taxes. Consequently, total operating expenses climbed 5.4% from the corresponding quarter last year.

But the escalation in costs was comprehensively canceled by soaring revenues, which meant that PBR reported an operating income of $12,268 million in the first quarter of 2022 compared with $5,975 million a year ago.

Financial Position

During the three months ended Mar 31, 2022, Petrobras’ capital investments and expenditures totaled $1,768 million compared with $1,913 million in the prior-year quarter.

Importantly, the Zacks Rank #1 (Strong Buy) company generated positive free cash flow for the 28th consecutive quarter, with the metric rising to $7,932 million from $5,594 million recorded in last year’s corresponding period.

At the end of the first quarter, Petrobras had a net debt of $40,072 million, decreasing from $58,424 million a year ago and $47,626 million as of Dec 31, 2021. The company ended the quarter with cash and cash equivalents of $17,232 million.

Meanwhile, Petrobras’ net debt to trailing 12 months EBITDA ratio improved to 0.81 from 2.03 in the previous year. It was also better than 1.09 at the end of 2021.

Other Energy Picks

Apart from Petrobras, investors interested in the energy sector might look at Devon Energy (DVN - Free Report) , Canadian Natural Resources (CNQ - Free Report) and Marathon Oil (MRO - Free Report) .

You can see the complete list of today’s Zacks #1 Rank stocks here.

Devon Energy: Devon Energy is valued at some $46.2 billion. The Zacks Consensus Estimate for DVN’s 2022 earnings has been revised 33% upward over the past 60 days.

Devon Energy, headquartered in Oklahoma City, OK, delivered an 8.1% beat in Q1. DVN shares have surged around 192.4% in a year.

Canadian Natural Resources: CNQ beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 17.6%, on average.

Canadian Natural is valued at around $71.5 billion. CNQ has seen its shares gain around 97.7% in a year.

Marathon Oil: Marathon Oil is valued at some $19.3 billion. The Zacks Consensus Estimate for MRO’s 2022 earnings has been revised 58.3% upward over the past 60 days.

Marathon Oil, headquartered in Houston, TX, has a trailing four-quarter earnings surprise of roughly 23%, on average. MRO shares have gained around 138.3% in a year.