We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Petrobras Raises Alarm Over Brazil's New Reference Oil Price Policy
Read MoreHide Full Article
Key Takeaways
Petrobras warns new oil price rules may hurt post-salt and onshore project viability.
Brazil expects policy to add 1B reais in tax and royalty revenues this year.
Refiners support the change, but Petrobras fears reduced investment in non-pre-salt fields.
Petróleo Brasileiro S.A. - Petrobras (PBR - Free Report) has expressed concerns over Brazil’s upcoming change in the reference oil price, a key factor in determining taxes and royalties paid by drillers. The company noted that the new benchmark could undermine the economic viability of offshore post-salt fields and onshore projects, which it is seeking to revitalize. Unlike pre-salt reserves, which carry higher value, oil from post-salt fields commands a lower price, making them more vulnerable under the revised rules.
Impact on Brazil’s Energy Landscape
The change comes after years of debate, with the oil regulator ANP approving the new criteria in July. The government expects the adjustment to raise taxes and royalties would potentially boost revenues by an additional 1 billion reais ($184 million) by year-end. However, it could also result in a heftier tax and royalty bill for operators like Petrobras. The company noted that the new reference oil price will treat both types of production (pre-salt and post-salt) similarly when calculating fiscal obligations, although post-salt fields are less profitable. While this supports fiscal goals, Petrobras fears it could slow investment in areas still rich with untapped reserves.
Industry Pushback and What’s at Stake
The oil industry, and Petrobras in particular, has been quick to highlight the risk of these new rules discouraging investments in less profitable, post-salt and onshore fields. Higher government receipts may come at the expense of much-needed capital for future projects, as increased tax pressure could undermine plans for further exploration and development. Meanwhile, Brazil’s refining sector has welcomed the move, arguing it will help create a more balanced market for domestic sales and exports.
Balancing Revenues and Viability
The company stressed the fact that while a lot of oil is still left to be produced, ensuring its economic feasibility remains critical. The debate underscores Brazil’s challenge of balancing its need for greater government revenues with the long-term sustainability of its energy sector. For Petrobras, the shift raises questions about future project competitiveness and investment in non-pre-salt fields.
PBR’s Zacks Rank and Key Picks
Headquartered in Rio de Janeiro, Petroleo Brasileiro S.A., or Petrobras S.A., is the largest integrated energy firm in Brazil and one of the largest in Latin America. Currently, PBR has a Zacks Rank #3 (Hold).
New York-based Vitesse Energy is an independent energy company, engaged in the acquisition, development and production of non-operated oil and natural gas properties. The Zacks Consensus Estimate for VTS’ 2025 revenues indicates 15.3% year-over-year growth.
Global Partners is a Delaware limited partnership formed by affiliates of the Slifka family. It is one of the largest wholesale distributors of distillates. The Zacks Consensus Estimate for GLP’s 2025 earnings indicates 23.24% year-over-year growth.
Calgary, Alberta-based Enbridge is a leading energy infrastructure company. One of its businesses is the transportation of energy through the most extensive and advanced crude and liquids pipeline system. The Zacks Consensus Estimate for ENB’s 2025 earnings indicates 9.50% year-over-year growth.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Petrobras Raises Alarm Over Brazil's New Reference Oil Price Policy
Key Takeaways
Petróleo Brasileiro S.A. - Petrobras (PBR - Free Report) has expressed concerns over Brazil’s upcoming change in the reference oil price, a key factor in determining taxes and royalties paid by drillers. The company noted that the new benchmark could undermine the economic viability of offshore post-salt fields and onshore projects, which it is seeking to revitalize. Unlike pre-salt reserves, which carry higher value, oil from post-salt fields commands a lower price, making them more vulnerable under the revised rules.
Impact on Brazil’s Energy Landscape
The change comes after years of debate, with the oil regulator ANP approving the new criteria in July. The government expects the adjustment to raise taxes and royalties would potentially boost revenues by an additional 1 billion reais ($184 million) by year-end. However, it could also result in a heftier tax and royalty bill for operators like Petrobras. The company noted that the new reference oil price will treat both types of production (pre-salt and post-salt) similarly when calculating fiscal obligations, although post-salt fields are less profitable. While this supports fiscal goals, Petrobras fears it could slow investment in areas still rich with untapped reserves.
Industry Pushback and What’s at Stake
The oil industry, and Petrobras in particular, has been quick to highlight the risk of these new rules discouraging investments in less profitable, post-salt and onshore fields. Higher government receipts may come at the expense of much-needed capital for future projects, as increased tax pressure could undermine plans for further exploration and development. Meanwhile, Brazil’s refining sector has welcomed the move, arguing it will help create a more balanced market for domestic sales and exports.
Balancing Revenues and Viability
The company stressed the fact that while a lot of oil is still left to be produced, ensuring its economic feasibility remains critical. The debate underscores Brazil’s challenge of balancing its need for greater government revenues with the long-term sustainability of its energy sector. For Petrobras, the shift raises questions about future project competitiveness and investment in non-pre-salt fields.
PBR’s Zacks Rank and Key Picks
Headquartered in Rio de Janeiro, Petroleo Brasileiro S.A., or Petrobras S.A., is the largest integrated energy firm in Brazil and one of the largest in Latin America. Currently, PBR has a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like Vitesse Energy, Inc. (VTS - Free Report) , Global Partners LP (GLP - Free Report) and Enbridge Inc. (ENB - Free Report) . WhileVitesse Energy and Global Partners currently sport a Zacks Rank #1 (Strong Buy) each, Enbridge carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
New York-based Vitesse Energy is an independent energy company, engaged in the acquisition, development and production of non-operated oil and natural gas properties. The Zacks Consensus Estimate for VTS’ 2025 revenues indicates 15.3% year-over-year growth.
Global Partners is a Delaware limited partnership formed by affiliates of the Slifka family. It is one of the largest wholesale distributors of distillates. The Zacks Consensus Estimate for GLP’s 2025 earnings indicates 23.24% year-over-year growth.
Calgary, Alberta-based Enbridge is a leading energy infrastructure company. One of its businesses is the transportation of energy through the most extensive and advanced crude and liquids pipeline system. The Zacks Consensus Estimate for ENB’s 2025 earnings indicates 9.50% year-over-year growth.