Petrobras new CEO cost in value
Petrobras Craters, Real Falls in Brazil's Worst Rout in Months
$19 billion over two days
Analysts downgrade stock after President named new CEO
Interference risk might delay sale of the company's refineries
By Vinicius Andrade/Bloomberg
Petroleumworld 02 23 2021
A sell-off in Brazil's state-controlled oil firm Petroleo Brasileiro SA picked up on Monday after a group of analysts downgraded the stock within 24 hours, following the government's decision to replace the company's chief executive officer.
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Bradesco BBI , BTG Pactual , Credit Suisse , JPMorgan , Nau Securities , Santander , Scotiabank and XP Investimentos cut their ratings on the shares after Brazilian President Jair Bolsonaro on Friday decided to fire the oil company's CEO following a spat over hikes in fuel prices and moved to appoint Joaquim Silva e Luna, a former army general, as a replacement. Company's board still needs to confirm the decision.
Shares in Petrobras tumbled in Sao Paulo, erasing about 102.5 billion reais ($18.8 billion) in market value in the past two sessions. The company's American Depositary Receipts fell 21% in New York.
Investors are concerned the hasty appointment of a new CEO may signal a potential shift away from market-friendly policies. The oil company's discount to global peers is expected to widen and the sale of its refineries could also face delays as a result, hindering deleveraging plans, analysts said .
“Fundamentals are unlikely to be the main driver of the stock in the near term,” Morgan Stanley analysts led by Bruno Montanari wrote in a report dated Feb. 21, moving the stock to not-rated from overweight. “We will have to weigh the role of a much increased risk perception in the sector, the country, and PBR specifically.”
Fuel prices move Bolsonaro to replace Petrobras CEO with a General
Here's what analysts are saying:
Bradesco BBI, Vicente Falanga
- Potential sudden change in top management adds risks to investment case
- Questions remain unanswered including what will be the firm's new diesel pricing policy and if recent hikes in prices could be reverted. There might be a delay to gross debt targets amid risks to the sale of refineries
- Stock was cut to underperform from neutral; price target lowered to 24 reais from 34
Morgan Stanley, Montanari
- Petrobras is in a better financial standing compared to prior intervention years, but risk perception has sharply increased
- “An intervention bear case seems to be unfolding”. Shares traded at a 5-15% discount to international peers and are likely to trade at a bigger discount in the near future
- Intervention may potentially affect the firm's divestment program, particularly the sale of refineries.
- Stock was moved to not-rated from overweight; price target of $16.50 for ADRs was removed
JPMorgan, Rodolfo Angele
- Announcement of a new CEO at this moment raises questions about Brazilian market working at parity
- Sees uncertainties regarding capex budgets, capital discipline and sale of assets
- Stock was downgraded to underweight from overweight; price target for ADRs lowered to $9 from $17
XP, Gabriel Francisco
- Nomination of Silva e Luna is negative in terms of governance given risks to the firm's autonomy
- Also mentions risks for the firm to keep adjusting prices to international rates
- There are many uncertainties and stock should trade at a higher discount to historical averages and other global oil firms
- Stock was cut to sell from neutral price target lowered to 24 reais from 32