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Petrobras (PBR) Q4 Earnings Beat, Revenues Miss Estimates

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Brazil's state-run energy giant Petróleo Brasileiro S.A. (PBR - Free Report) or Petrobras announced fourth-quarter earnings per ADR of 20 cents, beating the Zacks Consensus Estimate of 18 cents. However, the bottom line fell by a penny year over year. 

The earnings beat was supported by higher oil prices, partially negated by lower production and decreased margin from downstream operations.

Petrobras’ free cash flows through 2017 increased almost 12% to $13,850 million, reflecting that the company has sufficient operating cashflow to support investment. However, adjusted EBITDA was down 6% year over year to $24,039 million. 

During 2017, exports of oil and oil products rose 23%, while imports fell 18%. This helped the company maintain the position of net exporter with a positive balance of 361 thousand barrels per day.

Asset Disposal Plan

Over the 2017-2018 period, the company intends to rake in proceeds of $21 billion from asset sale. This will help Petrobras strengthen its balance sheet by lowering debt.

Revenue, Production and Prices

The troubled national oil company’s net fourth-quarter 2017 operating revenues of $23,567 million improved from the year-earlier sales of $21,403 million on higher crude prices but fell shy of the Zacks Consensus Estimate of $26,321 million.

The Rio de Janeiro-headquartered company’s total oil and gas production during the fourth quarter reached 2,737 thousand oil-equivalent barrels per day (MBOE/d) — 80.4% liquids — down from 2,868 MBOE/d in the same period of 2016. The decline can be attributed to issues related to operations in the Hadrian South gas field.

Compared with the fourth quarter of 2016, Brazilian oil and natural gas production — constituting 96% of the overall output — dropped 4% to 2,636 MBOE/d.  

In the October-to-December period, the average sales of oil in Brazil jumped 22.1% from the year-earlier period to $55.82 per barrel.

Capital Spending & Balance Sheet

During the year ended Dec 31, 2017, Petrobras’ capital investments and expenditures totaled $13,639 million, lower than $14,085 million incurred in the year-ago period.

This allowed the world's most indebted oil company to record the lowest debt over the last six years. At the end of December 2017, the company had net debt of $84,871 million, reflecting a decline from $96,381 million as of Dec 31, 2016. Net debt-to-capitalization ratio was approximately 51%, down from 55% a year ago. Additionally, Petrobras ended the fourth quarter with cash and cash equivalents of $22,519 million.

Petroleo Brasileiro S.A.- Petrobras Price, Consensus and EPS Surprise

 

Petroleo Brasileiro S.A.- Petrobras Price, Consensus and EPS Surprise | Petroleo Brasileiro S.A.- Petrobras Quote

Zacks Rank & Key Picks

Petrobras carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. Meanwhile, a few better-ranked players in the energy sector are ConocoPhillips (COP - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Concho Resources Inc. . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Headquartered in Houston, TX, ConocoPhillips is a major upstream energy player. The company is expected to witness year-over-year earnings growth of 380% in 2018.

Headquartered at Irving, TX, Pioneer Natural Resources is an upstream energy firm. The company has an average positive earnings surprise of 66.9% for the last four quarters.

Headquartered in Midland, TX, Concho is also an upstream energy company. The firm will likely see year-over-year earnings growth of 73.2% in 2018.

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