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Petrobras (PBR) to Lower Debt with Liquigas Distribuidor Sale

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Brazil's state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) recently announced its decision to divest Liquigás Distribuidora SA for $819 million. The unit, which distributes cooking gas, will be sold to Ultrapar Participacoes SA – a fuel and petrochemical holding firm.

The deal has received clearance from Petrobras’ board but is awaiting approval from Brazil´s antitrust agency – CADE.

The divestment plan is in sync with Petrobras’ efforts to lower its huge debt burden. In fact, the company is the most indebted in the world with a debt burden of $122.65 billion at the end of third-quarter 2016. As a result, Petrobras intends to divest assets worth as much as $15.1 billion over the 2015–2016 period and another $19.5 billion over 2017–2018. Through these initiatives, the company expects to achieve a net debt-to-EBITDA ratio of 2.5 times in 2018 as against 5.3 times at year-end 2015.

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company’s involvement in the multibillion-dollar money laundering and bribery case has not only affected its goodwill but also put its credit rating at  risk, making it difficult for the firm to find creditors.

In the third quarter of 2016, Petrobras’ net operating revenues at $21,693 million missed the Zacks Consensus Estimate of $23,120 million and also decreased 6% from the year-earlier level of $23,179 million. The underperformance stemmed from a decline in global crude prices and unfavorable exchange rate fluctuations.

As a result, Petrobras carries a Zacks Rank #5 (Strong Sell). Some better-ranked players in the energy sector are Ultra Petroleum Corp. , EQT Midstream Partners, LP (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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