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Petrobras bulls see output surging despite past
weak quarter

Dado Galdieri / Bloomberg

Petrobras site

- CEO said first quarter wasn't brilliant, results will improve
- Shares gained as much as 4.3 percent in Sao Paulo trading

By Vinicius Andrade and Sabrina Valle / Bloomberg

Petroleumworld 05 09 2019

Petroleo Brasileiro SA 's shares rallied on Wednesday as investors disregarded weaker-than-expected first-quarter results and bet on robust oil production growth and debt reduction going forward.

Shares rose as much as 4.3 percent in Sao Paulo, the biggest intraday gain in almost three weeks. While production stoppages hurt production in the first quarter, the state-controlled company has since bounced back and expects to meet its target of 2.8 million barrels a day of oil and equivalents for this year.

“We still see the deleveraging commitment as strong enough to support a positive stance on the share,” BTG Pactual analysts led by Thiago Duarte wrote in a report. Duarte, who reiterated a buy rating for the firm's American depositary receipts, expects a more positive result in the second quarter.

Bradesco BBI, Vicente Falanga

  • Petrobras's recurring Ebitda came in below consensus, but in line with Bradesco BBI's estimate
  • Free cash flow to equity deteriorated, impacted by the class action settlement payment
    • “We expect an improvement going forward”
  • Outperform reiterated
    • “We continue to like the long-term aspects of the investment case, which include solid cash flow generation, deleveraging, and the potential recovery of its investment-grade status”

BTG Pactual, Thiago Duarte

  • Co. posted “mostly uninspiring” quarter due to production stoppages and lower Brent prices
  • Positive mindset remains in place
    • “We remain buyers following recent pullback”
  • Management reiterated its “relentless pursuit” to regain its investment grade, and focus on exploration, production, and operational freedom
  • BTG still sees the deleveraging commitment as strong enough to support a positive stance

Itau BBA, Andre Hachem

  • Petrobras' results were broadly in line with Itau BBA's expectations, but below the market consensus
  • Weaker production figure reflects a higher concentration of maintenance stoppages and delays in the startup of new units
  • Petrobras remains top pick in the sector, on production growth, re-rating and deleveraging
  • Outperform rating maintained

Santander, Christian Audi

  • Petrobras reported weaker-than-expected results, 10 percent below Santander estimates, 5 percent lower than consensus
  • Petrobras' balance sheet increased by 103 billion reais due to IFRS-16, leverage rose to 3.19X vs 2.37X net debt/Ebitda due to new accounting rules
  • Reiterates Petrobras as Santander's top pick in Latin America, expects better operational results with higher oil prices and production boosting cash flow generation and reducing leverage



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Story by Vinicius Andrade and Sabrina Valle from Bloomberg. 05 08 2019


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