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Petrobras Takes a Step Closer to Renewable Sources with TOTAL

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Petróleo Brasileiro S.A. or Petrobras (PBR - Free Report) recently announced that the company has joined hands with TOTAL S.A. (TOT - Free Report) in order to assess the opportunities related to renewable energy sources in Brazil. The companies, through a memorandum of understanding (MoU), decided to analyze the solar and onshore wind energy segments in the country.

The non-binding agreement of Petrobras with TOTAL and its environment-focused subsidiary, Total Eren SA is expected to dilute the risks associated with the renewable energy market in the country. Moreover, it can provide gains in scale and synergies to the companies.

Notably, Petrobras is working with TOTAL since the beginning of the last year. The latest agreement is in line with Petrobras’ strategy to create high-value renewable energy business with global energy players. Total Eren’s huge knowledge base regarding renewable sources is expected to benefit the company’s transition to low-carbon energy mix.

As far as renewable sources are concerned, the Brazilian state-run energy company owns four wind farms at present, which produce 104 megawatt of electricity in total. Moreover, the company has a Rio Grande do Norte-based 1.1 megawatt solar photovoltaic power research and development plant. On the other hand, TOTAL is a major name in the renewable market. Even last week, the company finished the €1.4 billion acquisition process for Direct Energie’s 73.04% stake, which owns 550 megawatt of renewable properties.

Price Performance

Headquartered in Rio de Janeiro, Petrobras has gained 32.7% in the past year compared with 35.8% growth of its industry.

Zacks Rank and Stocks to Consider

Currently, Petrobras has a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like BP p.l.c. (BP - Free Report) and EOG Resources, Inc. (EOG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

London-based BP is an integrated energy company. The company’s top line for 2018 is anticipated to improve 12.6% year over year, while its bottom line is expected to increase 77.7%.

Houston, TX-based EOG Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 41.4% year over year. In the last four reported quarters, the company recorded an average positive earnings surprise of 30.1%.

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