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Petrobras (PBR) Boosts Refining Plan Amid Rising Diesel Imports
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Petrobras (PBR - Free Report) outlined its strategy to optimize motor fuel production from its local refineries while simultaneously increasing imports of cost-effective Russian diesel. This move came after Brazil witnessed a significant surge in foreign diesel purchase, particularly from Russian suppliers, in June.
The Rise of Russian Diesel Imports
Brazil experienced a notable increase of nearly 13% in total diesel imports, taking the figure to 1.08 billion liters. Russian suppliers accounted for 64% of this volume, indicating a significant rise from the previous months’ figure when their share remained below half of the total imports. This influx of Russian diesel has been largely facilitated by the discounted prices resulting from economic sanctions imposed by the United States and other democratic nations in response to Russia's invasion of Ukraine.
Petrobras' Stance on Cheaper Diesel Supplies
While the availability of cheaper diesel supplies is undoubtedly attractive, Petrobras' CEO Jean Paul Prates emphasized that imported motor fuel cannot replace local output. Prates described the current purchase of Russian diesel as "circumstantial" and highlighted the positive results achieved by Petrobras through optimum utilization of its refineries. In fact, PBR has raised the total utilization rate of its refineries to 93%, marking its highest since 2015.
Petrobras' Refinery Expansion Plan
In order to strengthen its refining capabilities and adapt to the evolving energy landscape, the company has outlined an ambitious plan for refinery expansion. It aims to invest approximately $9.2 billion during 2023-2027 to enhance the production of ultra-low sulfur diesel and middle distillates across its refineries. This investment demonstrates Petrobras' commitment to technological advancements and sustainable practices in the refining sector.
Benefits of Optimizing Local Refineries
PBR’s efforts toward maximizing motor fuel production from its local refineries stem from its aim to solidify its market position and reap long-term benefits. By leveraging the full capacity of its refineries, the company can strengthen its competitiveness and accelerate growth. According to Prates, it would be illogical to operate a refinery at half its capacity when the potential for better output exists.
Limitations of Imported Diesel
Petrobras acknowledges the attractiveness of cheaper diesel supplies but underscores the need to maintain and maximize domestic output. Russian diesel imports offer only short-term fuel solutions for Brazil, but cannot replace local production's importance. This approach ensures a level of self-sufficiency and minimizes dependency on external sources.
The combination of optimized local production and strategic imports will help Petrobras cater to Brazil's demand for motor fuel effectively.
Evolution Petroleum is worth approximately $264.82 million. EPM currently pays a dividend of 48 cents per share, or 6.03% on an annual basis.
The company currently has a forward P/E ratio of 7.37. In comparison, its industry has an average forward P/E of 10.60, which means EPM is trading at a discount to the group.
Murphy USA is valued at around $6.75 billion. In the past year, its shares have risen 15.2%.
MUSA currently pays a dividend of $1.52 per share, or 0.49% on an annual basis. Its payout ratio currently sits at 6% of earnings.
NGL Energy Partners is valued at around $502.64 million. In the past year, its units have risen 164.6%.
The partnership currently has a forward P/E ratio of 4.38. In comparison, its industry has an average forward P/E of 14.10, which means NGL is trading at a discount to the group.
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Petrobras (PBR) Boosts Refining Plan Amid Rising Diesel Imports
Petrobras (PBR - Free Report) outlined its strategy to optimize motor fuel production from its local refineries while simultaneously increasing imports of cost-effective Russian diesel. This move came after Brazil witnessed a significant surge in foreign diesel purchase, particularly from Russian suppliers, in June.
The Rise of Russian Diesel Imports
Brazil experienced a notable increase of nearly 13% in total diesel imports, taking the figure to 1.08 billion liters. Russian suppliers accounted for 64% of this volume, indicating a significant rise from the previous months’ figure when their share remained below half of the total imports. This influx of Russian diesel has been largely facilitated by the discounted prices resulting from economic sanctions imposed by the United States and other democratic nations in response to Russia's invasion of Ukraine.
Petrobras' Stance on Cheaper Diesel Supplies
While the availability of cheaper diesel supplies is undoubtedly attractive, Petrobras' CEO Jean Paul Prates emphasized that imported motor fuel cannot replace local output. Prates described the current purchase of Russian diesel as "circumstantial" and highlighted the positive results achieved by Petrobras through optimum utilization of its refineries. In fact, PBR has raised the total utilization rate of its refineries to 93%, marking its highest since 2015.
Petrobras' Refinery Expansion Plan
In order to strengthen its refining capabilities and adapt to the evolving energy landscape, the company has outlined an ambitious plan for refinery expansion. It aims to invest approximately $9.2 billion during 2023-2027 to enhance the production of ultra-low sulfur diesel and middle distillates across its refineries. This investment demonstrates Petrobras' commitment to technological advancements and sustainable practices in the refining sector.
Benefits of Optimizing Local Refineries
PBR’s efforts toward maximizing motor fuel production from its local refineries stem from its aim to solidify its market position and reap long-term benefits. By leveraging the full capacity of its refineries, the company can strengthen its competitiveness and accelerate growth. According to Prates, it would be illogical to operate a refinery at half its capacity when the potential for better output exists.
Limitations of Imported Diesel
Petrobras acknowledges the attractiveness of cheaper diesel supplies but underscores the need to maintain and maximize domestic output. Russian diesel imports offer only short-term fuel solutions for Brazil, but cannot replace local production's importance. This approach ensures a level of self-sufficiency and minimizes dependency on external sources.
The combination of optimized local production and strategic imports will help Petrobras cater to Brazil's demand for motor fuel effectively.
Zacks Rank and Key Picks
Currently, PBR carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum (EPM - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Murphy USA (MUSA - Free Report) and NGL Energy Partners (NGL - Free Report) , both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum is worth approximately $264.82 million. EPM currently pays a dividend of 48 cents per share, or 6.03% on an annual basis.
The company currently has a forward P/E ratio of 7.37. In comparison, its industry has an average forward P/E of 10.60, which means EPM is trading at a discount to the group.
Murphy USA is valued at around $6.75 billion. In the past year, its shares have risen 15.2%.
MUSA currently pays a dividend of $1.52 per share, or 0.49% on an annual basis. Its payout ratio currently sits at 6% of earnings.
NGL Energy Partners is valued at around $502.64 million. In the past year, its units have risen 164.6%.
The partnership currently has a forward P/E ratio of 4.38. In comparison, its industry has an average forward P/E of 14.10, which means NGL is trading at a discount to the group.