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Petrobras' (PBR) Q1 Earnings & Sales Lag Estimates, Down Y/Y

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Petrobras (PBR - Free Report) announced first-quarter earnings per ADS of 16 cents, missing the Zacks Consensus Estimate of 22 cents. The weaker-than-expected results can be attributed to soft contribution from both the upstream and downstream segments. The bottom line also deteriorated from the year-earlier earnings of 32 cents.

Brazil’s state-run energy giant reported revenues of $21,229 million, lagging the Zacks Consensus Estimate of $21,645 million and the year-earlier sales of $22,958 million.

Let's take a deeper look at the recent performances of the company's two main segments: Upstream (Exploration & Production) and Downstream (or Refining, Transportation and Marketing).

Upstream: The Rio de Janeiro-headquartered company’s total oil and gas production during the first quarter came in at 2,539 thousand oil-equivalent barrels per day (MBOE/d)—comprising 80% liquids — down from 2,681 MBOE/d in the corresponding period of 2018.Brazilian oil and natural gas production — constituting 97% of the overall output — decreased 4.7% from first-quarter 2018 to 2,461 MBOE/d.

In addition to the output decline, Petrobras also bore the brunt of weak oil price realizations. During the quarter, oil price realizations came in at $63.20, down 5% from the year-earlier figure of $66.76 per barrel. Consequently, the segment’s revenues declined from $12,550 million in the prior-year quarter to $11,384 million. Lower production, weaker realized prices and higher operating costs resulted in a 24%deterioration in the segment’s profits to $2,689 million from the year-ago figure of $3,556 million.

Downstream: Revenues from the segment summed $16,136 million, lower than the year-ago figure of $17,060 million. Petrobras' downstream earnings also declined 46% from the year-ago quarter to $506 million, owing to weaker oil products sales margins.

Costs: During the period, Petrobras’ sales, general and administrative expenses were $616 million, lower than the year-ago period’s 660 million. Selling expenses also fell 13.8% from a year ago to $1,097 million.

Financial Position: During the three months ended Mar 31, 2019, Petrobras’ capital investment and expenditure totaled around $2,337 million, 24% lower than $3,067 million incurred in the year-ago period.

While Petrobras generated positive free cash flow for the 16th consecutive quarter, the metric declined to $3,212 million from $4,005 million recorded in the year-ago period. Adjusted EBITDA also declined 8% y/y to $7,294 million.

At the end of the quarter, the company had net debt of $95,525 million, increasing from $81,447 million a year ago. Net debt-to-capitalization ratio increased to 56% from 49% a year ago. Petrobras ended the first quarter with cash and cash equivalents of $9,361 million.

Zacks Rank and Key Picks

Petrobras currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, investors interested in the energy space can consider some better-ranked players such as:

Devon Energy Corporation (DVN - Free Report) : Devon’s 2019 earnings are expected to grow 68.2% on a year-over-year basis.

Repsol SA (REPYY - Free Report) : Repsol delivered average positive earnings surprise of 8.98% in the trailing four quarters.

Bonanza Creek Energy, Inc. (BCEI - Free Report) : The company delivered average positive earnings surprise of 3.99% in the trailing four quarters. Bonanza Creek’s 2019 revenues are expected to grow 23.1% y/y.

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