Yahoo Finance Petrobras (PBR) Asked to Furnish Investment Plans by Government
Petrobras PBR, a state-controlled oil producer in Brazil, has been asked by the country's Ministry of Mining and Energy to provide details on its investment plans aimed at boosting economic growth. The request followed Brazil’s recently elected president, Luiz Inácio Lula da Silva's call for the company to stop trading assets and make investments that would aid economic growth.
PBR has already undertaken several measures to reduce its debt load. These include selling off assets, including stakes in certain distribution companies and refineries. However, it has also been focusing on increasing production from deepwater fields off the coast of Brazil.
In November 2022, Petrobras revealed a 15% increase in its five-year spending plan to $78 billion, with minor changes to its production targets. The company also expects to invest $68 billion during 2022-2026, a sharp increase from its previous five-year investment plan. This can be attributed to PBR’s aim of boosting its oil production.
With the government's request, it is evident that Petrobras plays an important role in Brazil's economic growth. Below, we will explore the company’s asset-selling strategy, investment plans and their potential impact on Brazil's economy.
Asset Sell-Offs
Petrobras has sold several significant assets in recent years. These include onshore and shallow-water offshore fields, its gas pipeline network, as well as stakes in certain distribution companies and refineries. The company has been using the sales proceeds to reduce its debt and focus on production from deepwater fields off Brazil's coast.
Investment Plans
Petrobras has allocated a significant portion of its investment portfolio to exploration and production activities. The company plans to increase its exploration efforts in the pre-salt layer, which is estimated to hold vast oil reserves. PBR expects this investment to increase its oil and gas production from 2.7 million barrels per day in 2021 to 3.3 million barrels per day in 2026.
The Brazil-based integrated energy company is also investing in the development of natural gas fields in the Santos Basin that could significantly increase the country’s domestic gas production. Petrobras aims to escalate its gas production from 94 million cubic meters per day in 2021 to 146 million cubic meters per day in 2026.
Refining and Distribution Investments
The company also plans to invest in refining and distribution activities. It aims to modernize and expand its refining capacity for increasing exports and improving the quality of its products. Petrobras has also expressed interest in investing in renewable energy, such as biofuels, as part of its diversification strategy.
The company aims to invest in new pipeline constructions and distribution network expansion, which will enable it to enter new markets and increase market share. Petrobras also plans to increase the capacity of its lubricant production, which will support the growth of its downstream activities.
Impact on Brazil's Economy
Oil exploration and production investment has been a key driver of Brazil's economic growth over the past few years. Thanks to Petrobras' efforts, the country has been able to significantly boost its oil production. This, in turn, adds an impetus to Brazil's exports and reduces the country's dependence on imported oil. In fact, Brazil's oil production is expected to double by 2030.
The Government’s Take
Brazil's recently elected president, Luiz Inácio Lula da Silva, believes that Petrobras should use its significant resources to invest in the Brazilian economy and create jobs. Lula's comments have sparked a debate in the country regarding the role of PBR in the country's economy. While some people believe that the company should focus on developing its deepwater fields and supporting the Brazilian economy, others argue that it should continue to sell off assets to reduce debt and fund investments.
Conclusion
Petrobras' investment plans are significant for Brazil's economic growth. The company's investments in the pre-salt layer of the Santos Basin and renewable energy projects are expected to significantly boost Brazil's oil production and diversify its energy mix. The increased revenues from higher oil production will have a positive impact on the country's fiscal position. The Ministry of Mining and Energy's request for information on Petrobras’ investment plans shows that the government is committed to working with the company to promote economic growth.
Zacks Rank and Key Picks
Petrobras carries a Zacks Rank #4 (Sell) at present. Investors interested in the energy sector might look at some better-ranked stocks like Par Pacific PARR and Marathon Petroleum MPC,each sporting a Zacks Rank #1 (Strong Buy), and Ranger Energy Services RNGR, holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Par Pacific: PARR is worth approximately $1.63 billion. Its shares have risen 82.1% in the past year.
The company manages and maintains interests in energy and infrastructure businesses. Its operating segment consists of refining, retail and logistics.
Marathon Petroleum: MPC is valued at around $58.02 billion. It delivered an average earnings surprise of 20.91% for the last four quarters and its current dividend yield is 2.30%.
The company currently has a forward P/E ratio of 6.36. In comparison, its industry has an average forward P/E of 9.10, which means MPC is trading at a discount to the group.
Ranger Energy Services: RNGR is valued at around $242.99 million. In the past year, its shares have gained 16.8%.
Ranger Energy Services currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means RNGR is trading at a discount to the group.
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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report
Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
Par Pacific Holdings, Inc. (PARR) : Free Stock Analysis Report
Ranger Energy Services, Inc. (RNGR) : Free Stock Analysis Report
