With the sale of its stake in natural gas distribution unit, Petroleo Brasileiro S.A. or Petrobras PBR has ultimately reached its 2015 asset sale goal of $700 million. Raising cash through divesting properties has been a prime way for the company to pay off its massive debt load after it got involved in a money laundering scam.
In details, Petrobras announced the closure of sale of its 49% interest in Petrobras Gas S.A., or Gaspetro – primarily involved in the transportation and storage of natural gas and natural gas liquid – for $501 million to Mitsui & Co Ltd. of Japan. After fulfilling its 2015 asset sale program, the largest integrated energy firm in Brazil is on its way to fetch as high as $15 billion from its asset disposal program from the beginning of this year to year-end 2016.
Let’s go back to the story that made the company undertake a rigorous property divestment plan. After getting involved in a multibillion-dollar money laundering scandal last year and being downgraded by rating agency Moody’s Investors Service, it has been hard for Petrobras to raise money both in the debt and the equity markets. Hence, selling assets emerged as an easy option to raise money and pay back its debt.
To support this program, management revealed earlier that the company will turn considerably smaller in the coming four years but will be significantly profitable with a positive outlook.
Headquartered in Rio de Janeiro, Petrobras is one of the largest integrated energy firms in Latin America. The company boasts healthy production growth and has announced several important discoveries of late. Additionally, loans from China should offer some relief considering Petrobras’ huge debt burden and the money-laundering scandal, which has tarnished its credit metrics.
However, much is yet to be achieved considering the firm’s scale of operations and investment base. Adding to the problems is the currently weak commodity price environment.
As a result, Petrobras carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, some better-ranked players in the energy sector are Matrix Service Company MTRX, Energy Transfer Equity, L.P. ETE and Ocean Rig UDW Inc. ORIG. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment