Brazilian energy behemoth, Petroleo Brasileiro SA or Petrobras S.A. (PBR) expects to complete its $9 billion, five-year asset sale plan by the end of 2013 to curb its rising debt financing.
The company has completed divestitures of $1.8 billion so far this year, including the sale of 50% of its African assets in the recently ended quarter.
The asset sale has been one of the contributors to the reported year-over-year increase in net income for the second quarter. The divestment contributed $1.9 billion to operating income and $3.4 billion to cash. The divestiture program is a means by which the company plans to reduce its rising borrowing levels.
However, Petrobras may still need to resort to debt financing this year due to its foreign exchange exposure, weak production levels and lower liquid realizations.
The rising debt levels bring along with it the challenge of maintaining the credit rating. However, management believes that the rating agencies are comfortable with the company’s growth scenario and cost reduction measures.
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil. The company’s activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks, and refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.
Petrobras currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, other stocks such as Magellan Midstream Partners LP (MMP), Cabot Oil & Gas Corp. (COG) and Range Resources Corporation (RRC) are good buying options. All these stocks currently hold a Zacks Rank #1(Strong Buy).
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