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Nilanjan Choudhury

Petrobras (PBR) Swings to Surprise Q3 Loss, Stock Tumbles

PBR HLX EQM UPLMQ

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The share price of Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras (PBR - Free Report) crashed 8.7% Thursday after announcing third-quarter loss of $5,380 million, wider than the $1,062 million loss incurred in the year-earlier quarter. Loss per ADR came in at 82 cents (1 ADR = 2 shares), compared with the year-ago loss of 18 cents.

Moreover, the struggling oil producer’s performance could not match the Zacks Consensus Estimate of 9 cents profit amid huge asset write-downs, a further fall in global crude prices, unfavorable exchange rate fluctuations and unexpected costs related to a voluntary retirement program.

Petrobras’ net operating revenues of $21,693 million came below the Zacks Consensus Estimate of $23,120 million and were 6% less than the year-earlier level of $23,179 million.

PETROBRAS-ADR C Price, Consensus and EPS Surprise

 

PETROBRAS-ADR C Price, Consensus and EPS Surprise | PETROBRAS-ADR C Quote

The Rio de Janeiro-headquartered company’s total oil and gas production during the third quarter reached 2,869 thousand oil-equivalent barrels per day (MBOE/d), up from 2,800 MBOE/d in the same period of 2015. Brazilian oil and natural gas production – constituting 95% of the overall output – increased 4% to 2,722 MBOE/d but international volumes fell 22% year over year to 147 MBOE/d.

However, gains on the production front could not make up for the sharp downfall in international commodity prices, the net effect resulting in stable year-over-year gross profit for the upstream (or exploration & production) segment.

During the three months ended Sep 30, 2016, the average sales price of oil in Brazil rose 5% from the year-earlier period to $41.77 per barrel. However, average sales price of international oil was down 24% year over year to $42.38 per barrel. Regarding natural gas, average international sales price fell 21% from the third quarter of 2015.

Capital Spending & Balance Sheet

During the three months ended Sep 30, 2016, Petrobras’ capital investments and expenditures totaled $3,776 million, sharply less than the $5,443 million incurred in the year-ago period. At the end of the quarter, the company had cash and cash equivalents of $21,582 million and net debt of $100,291 million. Net debt-to-capitalization ratio was approximately 55%.

Zacks Rank & Stock Picks

Petrobras currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy sector are Ultra Petroleum Corp. (UPLMQ - Free Report) , EQT Midstream Partners L.P. (EQM - Free Report) and Helix Energy Solutions Group Inc. (HLX - Free Report) .   

Ultra Petroleum is likely to witness year-over-year earnings growth of 425.8% in the current year. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EQT Midstream is projected to witness year-over-year earnings growth of almost 12% in the current year. It has a Zacks Rank #2 (Buy).

Helix Energy posted an average positive earnings surprise of 56.42% in the last four quarters. The company has a Zacks Rank #2.

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