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Petroleo Brasileiro S.A., or Petrobras (PBR - Free Report) , announced fourth-quarter earnings per ADS of 96 cents, missing the Zacks Consensus Estimate of $1.12. Earnings also came in well below the year-ago profit of $1.25.
The underperformance can be attributed to lower Brent prices and rising pre-salt lifting costs that resulted in weak upstream profitability, plus higher refining outlay.
Recurring net income, which strips one-time items, came in at $8,288 million compared with $8,322 million a year earlier. Petrobras’ adjusted EBITDA fell to $13,470 million from $13,903 million a year ago.
The Brazil's state-run energy giant reported revenues of $27,107 million, which plunged 10.2% from the year-earlier sales of $30,171 million but topped the Zacks Consensus Estimate of $26,454 million on strong production.
While PBR plans to shell out RMB 14.2 billion or roughly $2.9 billion in total year-end payouts, the company did not pay special dividends for the full year, which disappointed investors.
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).
Petroleo Brasileiro S.A.- Petrobras Price, Consensus and EPS Surprise
Upstream: The Rio de Janeiro-headquartered company’s average oil and gas production during the fourth quarter reached 2,935 thousand barrels of oil equivalent per day (MBOE/d) — 81% liquids — up from 2,646 MBOE/d in the same period of 2022.
Compared with the year-ago quarter, Brazilian oil and natural gas production — constituting approximately 99% of the total output — increased 11.1% to 2,901 MBOE/d. The upside primarily reflected the ramp-up of certain offshore platforms in the Itapu and the Búzios fields.
In the October to December period, the average sales price of oil (or the average Brent crude price) dropped 5.3% year over year to $84.05 per barrel. However, the decrease in crude prices was more than offset by the improvement in production, thereby having a positive effect on upstream unit sales. Overall, the segment’s revenues improved to $18,506 million in the quarter under review from $16,973 million in the year-ago period.
But as far as the bottom line is concerned, an uptick in pre-salt lifting costs (which rose 7.5% from the year-ago period to $6.13 per barrel) meant that the upstream unit recorded a net income of $4,734 million, down 17.7% from fourth-quarter 2022 earnings of $5,751 million.
Downstream (or Refining, Transportation and Marketing): Revenues from the segment totaled $25,278 million, 8.2% lower than the year-ago figure of $27,542 million due to a decline in domestic sales volumes. Petrobras' downstream unit recorded a profit of $711 million, which compared unfavorably with earnings of $1,474 million in the fourth quarter of 2022. Apart from volume issues, the dip was due to higher unit refining costs.
Costs
During the period, Petrobras’ sales, general and administrative expenses were $1,783 million, 6.8% higher than the year-ago quarter. Selling expenses also rose from $1,293 million a year ago to $1,329 million. Moreover, surging ‘other expenses’ and an impairment loss of $2,198 million led to a $3,172 million increase in total operating expenses.
The jump in costs and lower revenues meant that PBR reported an operating income of $8,022 million in the fourth quarter of 2023 compared with $11,119 million a year ago.
Financial Position
During the three months ended Dec 31, 2023, Petrobras’ capital investments and expenditures (excluding signature bonus) totaled $3,558 million compared with $2,876 million in the prior-year quarter.
Importantly, the company generated a positive free cash flow for the 35th consecutive quarter, with the metric coming in at $8,073 million, which, however, dropped from $9,280 million recorded in last year’s corresponding period.
At the end of 2023, Petrobras had a net debt of $44,698 million, up from $41,516 million a year ago and $43,725 million as of Sep 30, 2023. The company ended the year with cash and cash equivalents of $12,727 million.
Meanwhile, Petrobras’ net debt to trailing 12 months EBITDA ratio deteriorated to 0.85 from 0.63 in the previous year. It was 0.83 at the end of the third quarter of 2023.
Zacks Rank & Key Picks
Petrobras carries a Zacks Rank #3 (Hold) at present.
Investors interested in the energy sector might look at operators like Murphy USA (MUSA - Free Report) , Sunoco LP (SUN - Free Report) and Helmerich & Payne (HP - Free Report) . MUSA and SUN have a Zacks Rank #1 (Strong Buy), while HP carries a Zacks Rank #2 (Buy).
Murphy USA: Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. It has a trailing four-quarter earnings surprise of 13.6%, on average.
Murphy USA is valued at around $8.7 billion. The company’s shares have surged 66% in a year.
Sunoco LP: The 2024 Zacks Consensus Estimate for SUN indicates 33.4% year-over-year earnings per unit growth.
Sunoco is valued at around $6.4 billion. SUN has seen its units rise 46.2% in a year.
Helmerich & Payne: Over the past 60 days, Helmerich & Payne saw the Zacks Consensus Estimate for fiscal 2024 move up 10.4%. HP beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, representing an average surprise of 20.2%.
Helmerich 7 payne is valued at around $3.9 billion. PBF’s shares have gained 6.8% in a year.
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Petrobras (PBR) Q4 Earnings Lag, Lower Payout Irks Investors
Petroleo Brasileiro S.A., or Petrobras (PBR - Free Report) , announced fourth-quarter earnings per ADS of 96 cents, missing the Zacks Consensus Estimate of $1.12. Earnings also came in well below the year-ago profit of $1.25.
The underperformance can be attributed to lower Brent prices and rising pre-salt lifting costs that resulted in weak upstream profitability, plus higher refining outlay.
Recurring net income, which strips one-time items, came in at $8,288 million compared with $8,322 million a year earlier. Petrobras’ adjusted EBITDA fell to $13,470 million from $13,903 million a year ago.
The Brazil's state-run energy giant reported revenues of $27,107 million, which plunged 10.2% from the year-earlier sales of $30,171 million but topped the Zacks Consensus Estimate of $26,454 million on strong production.
While PBR plans to shell out RMB 14.2 billion or roughly $2.9 billion in total year-end payouts, the company did not pay special dividends for the full year, which disappointed investors.
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).
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
Upstream: The Rio de Janeiro-headquartered company’s average oil and gas production during the fourth quarter reached 2,935 thousand barrels of oil equivalent per day (MBOE/d) — 81% liquids — up from 2,646 MBOE/d in the same period of 2022.
Compared with the year-ago quarter, Brazilian oil and natural gas production — constituting approximately 99% of the total output — increased 11.1% to 2,901 MBOE/d. The upside primarily reflected the ramp-up of certain offshore platforms in the Itapu and the Búzios fields.
In the October to December period, the average sales price of oil (or the average Brent crude price) dropped 5.3% year over year to $84.05 per barrel. However, the decrease in crude prices was more than offset by the improvement in production, thereby having a positive effect on upstream unit sales. Overall, the segment’s revenues improved to $18,506 million in the quarter under review from $16,973 million in the year-ago period.
But as far as the bottom line is concerned, an uptick in pre-salt lifting costs (which rose 7.5% from the year-ago period to $6.13 per barrel) meant that the upstream unit recorded a net income of $4,734 million, down 17.7% from fourth-quarter 2022 earnings of $5,751 million.
Downstream (or Refining, Transportation and Marketing): Revenues from the segment totaled $25,278 million, 8.2% lower than the year-ago figure of $27,542 million due to a decline in domestic sales volumes. Petrobras' downstream unit recorded a profit of $711 million, which compared unfavorably with earnings of $1,474 million in the fourth quarter of 2022. Apart from volume issues, the dip was due to higher unit refining costs.
Costs
During the period, Petrobras’ sales, general and administrative expenses were $1,783 million, 6.8% higher than the year-ago quarter. Selling expenses also rose from $1,293 million a year ago to $1,329 million. Moreover, surging ‘other expenses’ and an impairment loss of $2,198 million led to a $3,172 million increase in total operating expenses.
The jump in costs and lower revenues meant that PBR reported an operating income of $8,022 million in the fourth quarter of 2023 compared with $11,119 million a year ago.
Financial Position
During the three months ended Dec 31, 2023, Petrobras’ capital investments and expenditures (excluding signature bonus) totaled $3,558 million compared with $2,876 million in the prior-year quarter.
Importantly, the company generated a positive free cash flow for the 35th consecutive quarter, with the metric coming in at $8,073 million, which, however, dropped from $9,280 million recorded in last year’s corresponding period.
At the end of 2023, Petrobras had a net debt of $44,698 million, up from $41,516 million a year ago and $43,725 million as of Sep 30, 2023. The company ended the year with cash and cash equivalents of $12,727 million.
Meanwhile, Petrobras’ net debt to trailing 12 months EBITDA ratio deteriorated to 0.85 from 0.63 in the previous year. It was 0.83 at the end of the third quarter of 2023.
Zacks Rank & Key Picks
Petrobras carries a Zacks Rank #3 (Hold) at present.
Investors interested in the energy sector might look at operators like Murphy USA (MUSA - Free Report) , Sunoco LP (SUN - Free Report) and Helmerich & Payne (HP - Free Report) . MUSA and SUN have a Zacks Rank #1 (Strong Buy), while HP carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA: Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. It has a trailing four-quarter earnings surprise of 13.6%, on average.
Murphy USA is valued at around $8.7 billion. The company’s shares have surged 66% in a year.
Sunoco LP: The 2024 Zacks Consensus Estimate for SUN indicates 33.4% year-over-year earnings per unit growth.
Sunoco is valued at around $6.4 billion. SUN has seen its units rise 46.2% in a year.
Helmerich & Payne: Over the past 60 days, Helmerich & Payne saw the Zacks Consensus Estimate for fiscal 2024 move up 10.4%. HP beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, representing an average surprise of 20.2%.
Helmerich 7 payne is valued at around $3.9 billion. PBF’s shares have gained 6.8% in a year.