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Petrobras (PBR) Q2 Earnings Surge in Best Quarter Since 2011

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Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras (PBR - Free Report) announced second-quarter earnings per ADS of 44 cents, ahead of the Zacks Consensus Estimate of 31 cents and the year-ago profit of 2 cents.

Rising crude prices were primarily responsible for the outperformance, which catapulted net quarterly profit to $2,794 million -- the highest since 2011. The strong earnings report assumes greater significance considering the truckers’ strike in the quarter that forced Petrobras to temporarily lower diesel prices at the pump.

The troubled national oil company’s net operating revenues of $23,407 million was ahead of the year-earlier sales of $20,823 million but was shy of the Zacks Consensus Estimate of $26,260 million amid lower oil and gas production.

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

Six-Month Performance

Petrobras generated free cash flows of $8,546 million for the six months ended Jun 30, up 19% year over year as a result of operational improvement and lower investments. Moreover, adjusted EBITDA improved 17% from the prior period to $16,285 million.

Upstream: The Rio de Janeiro-headquartered company’s total oil and gas production during the first half reached 2,669 thousand oil-equivalent barrels per day (MBOE/d) – 80% liquids – down from 2,791 MBOE/d in the same period of 2017.

Compared with the first half of 2017, Brazilian oil and natural gas production – constituting 96% of the overall output – decreased 4% to 2,572 MBOE/d.

In the Jan to Jun period, the average sales price of oil in Brazil jumped 33% from the year-earlier period to $65 per barrel. This enabled Petrobras' upstream unit to earn $10,251 million in the first half, a massive improvement from the $5,362 million income in the year-earlier period.

Downstream: During the first half, Petrobras' downstream unit earned $3,176 million, up 2% from the year-earlier period figure of $3,114 million. The slight uptick reflects higher oil products sales margins and foreign currency effects, which were partly offset by decline in sales volumes.

Costs:During the period, Petrobras’ sales, general and administrative expenses stood at $1,272 million, 11% lower than the year-ago period. However, selling expenses rose by 32% to $2,590 million.

Capital Spending & Balance Sheet: During the six months ended Jun 30, 2018, Petrobras’ capital investments and expenditures totaled $6,205 million, 14% lower than the $7,230 million incurred in the year-ago period.

This allowed the world's most indebted oil company to trim its massive leverage. At the end of the Jun 2018, the company had net debt of $73,662 million, decreasing from the $84,871 million at the end of 2017 and $96,381 million as of Dec 31, 2016. Net debt-to-capitalization ratio during the first half was approximately 50%, down from 51% six months ago. Additionally, Petrobras finished the first semester with cash and cash equivalents of $16,997 million.

Zacks Rank & Stock Picks

Petrobras currently retains a Zacks Rank #2 (Buy).

Apart from Petrobras, one can also look at energy players like Penn Virginia Corporation (PVAC - Free Report) , Mammoth Energy Services, Inc. (TUSK - Free Report) and Eclipse Resources Corporation (ECR - Free Report) . All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Penn Virginia is an oil and gas exploration and production company with operations primarily focused on the Eagle Ford shale in south Texas. In the last 60 days, three earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 4% in the same period.

Mammoth Energy is an oilfield services provider with a variety of equipment, maintenance, and engineering and construction offerings to the energy sector. In the last 60 days, three earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 10% in the same period.

Eclipse Resources is engaged in the exploration and production of oil and natural gas properties in the Appalachian Basin, including the Utica and Marcellus Shales. In the last 60 days, four earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 50% in the same period.

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