Petrobras Shares Are On The Rise Today: What's Going On?

Petrobras shares are trading higher premarket on Friday. The Brazilian oil and gas giant disclosed the Business Plan 2025-2029.

During this period, Petrobras plans to focus on replenishing reserves, boosting production with a reduced carbon footprint, and expanding its portfolio with more sustainable, high-quality products in the oil & gas market.

Petrobras plans to invest $111 billion over five years, including $98 billion for projects already in progress and $13 billion for less mature projects still requiring further financial review. This investment is 9% higher than the previous plan for 2024-2028.

For Exploration and Production (E&P), Petrobras plans to invest $77.3 billion over the next five years, a 5% increase from its previous plan.

Approximately 60% of the Exploration and Production (E&P) segment’s budget will focus on pre-salt assets, emphasizing high-quality oil production with lower costs and greenhouse gas emissions.

Concurrently, the company is advancing revitalization projects in mature fields, particularly in the Campos Basin, to enhance recovery rates.

Petrobras aims to achieve total production of 3.2 million barrels of oil and gas equivalent per day (boed), including 2.5 million barrels of oil per day (bpd).

Also, the company has increased exploration investments to $7.9 billion in E&P over the next five years, a 5% increase from the previous plan.

Overall, Petrobras revised its gross debt limit to $75 billion. This adjustment considers robust leverage metrics, even with low Brent prices, while accommodating the growing impact of leases on gross debt.

The company anticipates strong free cash flow with projected ordinary dividends of $45 billion-$55 billion and flexibility for extraordinary payouts.

Investors can gain exposure to the stock via Global X Funds Global X Brazil Active ETF and Shares Latin America 40 ETF .

Price Action: PBR shares are up 2.54% at $14.51 premarket at the last check Friday.

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Petroleo Brasileiro S.A., or Petrobras PBR, announced third-quarter earnings per ADS of 93 cents, ahead of the Zacks Consensus Estimate of 82 cents and higher than the year-ago profit of 86 cents. The strong performance can be attributed to solid cost control measures.

Recurring net income, which strips out one-time items, came in at $5,937 million compared with $5,577 million a year earlier. Petrobras’ adjusted EBITDA fell to $11,480 million from $13,551 million a year ago.

Brazil's state-run energy giant reported revenues of $23,366 million, which fell 8.6% from the year-earlier sales of $25,552 million due to lower downstream sales and oil realizations. However, it beat the Zacks Consensus Estimate of $22,838 million.

Along with the third-quarter earnings announcement, PBR added that it plans to shell out RMB 17.12 billion in dividends and equity interests.

Petroleo Brasileiro S.A.- Petrobras Price, Consensus and EPS Surprise

Petroleo Brasileiro S.A.- Petrobras price-consensus-eps-surprise-chart | Petroleo Brasileiro S.A.- Petrobras Quote

Coming back to earnings, let's take a deeper look at the recent performances of PBR’s two main segments: Upstream (Exploration & Production) and Downstream (or Refining, Transportation and Marketing).

Upstream: The Rio de Janeiro-headquartered company’s average oil and gas production during the third quarter reached 2,689 thousand barrels of oil equivalent per day (MBOE/d) — 79% liquids — down from 2,877 MBOE/d in the same period of 2023.

Compared with the year-ago quarter, Brazilian oil and natural gas production — constituting approximately 99% of the total output — decreased 6.6% to 2,654 MBOE/d. The downside primarily reflected falling production rates in the pre-salt fields and other operational areas.

In the July to September period, the average sales price of oil (or the average Brent crude price) fell 7.6% year over year to $80.18 per barrel. The decrease in crude prices, together with lower production, had a negative effect on upstream unit sales. Overall, the segment’s revenues dropped to $15,383 million in the quarter under review from $17,922 million in the year-ago period.

As far as the bottom line is concerned, it was further dented by an uptick in pre-salt lifting costs (which rose 8.7% from the year-ago period to $6.10 per barrel). Consequently, the upstream unit recorded a net income of $5,416 million, down 13.7% from third-quarter 2023 earnings of $6,275 million.

Downstream (or Refining, Transportation and Marketing): Revenues from the segment totaled $21,739 million, 8.2% lower than the year-ago figure of $23,691 million, due to lower volumes. Petrobras' downstream unit recorded a profit of $255 million, which compared unfavorably with earnings of $814 million in the third quarter of 2023. Apart from a decline in refined products sales and output, the unit’s income was affected by higher refining cost.

Costs

During the period, Petrobras’ sales, general and administrative expenses were $1,602 million, 4.8% lower than the year-ago quarter. Selling expenses also fell from $1,288 million a year ago to $1,193 million. Moreover, a 28.4% increase in “other expenses” led to a marginal $15 million increase in total operating expenses.

While costs remained essentially flat, the decrease in revenues led to a drop in PBR’s operating income to $8,400 million in the third quarter of 2024 compared with $9,980 million a year ago.

Financial Position

During the three months ended Sept. 30, 2024, Petrobras’ capital investments and expenditures totaled $4,433 million compared with $3,392 million (excluding signature bonus) in the prior-year quarter.

Importantly, the Zacks Rank #3 (Hold) company generated a positive free cash flow for the 38th consecutive quarter, with the metric coming in at $6,857 million. However, it fell from $8,364 million recorded in last year’s corresponding period.

You can see the complete list of today’s Zacks #1 Rank stocks here.

At the end of the third quarter of 2024, Petrobras had a net debt of $44,251 million, up from $43,725 million a year ago but down from $46,160 million as of June 30, 2024. The company ended the quarter with cash and cash equivalents of $8,694 million.

Petrobras’ net debt to trailing 12-month EBITDA ratio deteriorated to 0.95 from 0.83 in the previous year. It was 0.95 at the end of the previous quarter too.

Some Key Energy Earnings

While we have discussed PBR’s third-quarter results in detail, let’s see how some other energy companies have fared this earnings season.

Oil supermajor Chevron CVX reported adjusted third-quarter earnings per share of $2.51, beating the Zacks Consensus Estimate of $2.47. The outperformance stemmed from higher-than-expected U.S. production in the company’s key upstream segment, as volume from the Permian Basin reached an all-time high. The unit’s domestic output of 1,605 thousand oil-equivalent barrels per day (MBOE/d) came in slightly above the consensus mark of 1,602 MBOE/d.

CVX recorded $9.7 billion in cash flow from operations, the same as the year-ago period, as a drop in earnings and a one-time outgo was somewhat offset by higher dividends from equity affiliates and lower working capital. Chevron’s free cash flow for the quarter was $5.6 billion.

ConocoPhillips COP, one of the world’s largest independent oil and gas producers, reported third-quarter 2024 adjusted earnings per share of $1.78, which beat the Zacks Consensus Estimate of $1.68. The outperformance can be attributed to higher oil equivalent production volumes and decreased total costs and expenses.

As of Sept. 30, 2024, ConocoPhillips had $5.2 billion in cash and cash equivalents. The company had a total long-term debt of $16.99 billion and a short-term debt of $1.3 billion as of the same date. Capital expenditure and investments totaled $2.92 billion. Net cash provided by operating activities was $5.8 billion.

Finally, we have refiner Marathon Petroleum’s MPC third-quarter adjusted earnings per share of $1.87, which comfortably beat the Zacks Consensus Estimate of 97 cents. The outperformance primarily reflects the stronger-than-expected performance of its Refining & Marketing segment. Operating income of the segment totaled $298 billion, surpassing the consensus mark, calling for a loss of $64 million on the back of strong product sales and throughput.

Marathon Petroleum’s total refined product sales volumes were 3,685 thousand barrels per day (mbpd), up from 3,596 mbpd in the year-ago quarter. Throughput rose marginally from 2,959 mbpd in the year-ago quarter to 2,991 mbpd and outperformed the Zacks Consensus Estimate of 2,852 mbpd. MPC’s operating costs per barrel increased from $5.14 in the year-ago quarter to $5.30.

Zacks Investment Research

Petrobras PBR, Brazil's largest oil and gas company, has announced an ambitious $111 billion investment plan for the 2025-2029 period, indicating a major move for both the company and the country’s energy sector. The plan, revealed through a securities filing on Monday, outlines Petrobras' goals for the next few years, highlighting its vital role in the economy of Brazil. The company plans to focus on boosting oil production, refining and expanding its operations. Let us delve into the specifics of Petrobras’ proposed plan, financial implications and its potential to strengthen Brazil's role as a global energy leader.

Petrobras' $111 Billion Investment Plan

Petrobras' board will review the business plan on Thursday, but the initial filing indicates significant growth ahead. The total investment of $111 billion is about $9 billion more than the previous 2024-2028 strategy, with a focus on exploration, production and refining. Petrobras aims to strengthen its position as Latin America's top oil producer, by producing about 3.2 million barrels of oil per day.

PBR’s Key Focus: Exploration and Production

A large portion of the investment, $77 billion, will go toward exploration and production, ensuring Petrobras remains the leading oil producer in Latin America. This includes expanding production in Brazil's offshore oil fields and exploring new reserves. The company has been investing in cutting-edge technology to increase efficiency and recovery rates from existing fields. These efforts are crucial for Petrobras to meet the growing global demand for energy.

PBR Expanding Into Refining and Petrochemicals

PBR also plans to expand its refining and petrochemical operations, with $20 billion reserved for these areas. This is part of a strategy to diversify its revenue sources and reduce dependence on the volatile crude oil market. The company will focus on increasing its refining capacity to meet Brazil’s growing needs for gasoline, diesel and jet fuel. Additionally, Petrobras sees opportunities in the petrochemical sector, aiming to tap into the rising demand for products like plastics and fertilizers.

PBR’s Commitment to Shareholders

The plan highlights Petrobras’ commitment to generating value for its shareholders, with $45 billion set aside for regular dividends between 2025 and 2029, and up to $10 billion in extraordinary dividends. The company's strong financial performance supports Brazil's broader economic goals, including social programs and job creation.

PBR’s Economic and Social Impact

The investment of $111 billion is expected to have a major positive impact on Brazil’s economy, creating jobs and boosting foreign investment. As the country's largest energy company, Petrobras plays a key role in driving economic growth. Its investment strategy will generate employment, especially in Brazil’s coastal regions where much of the company’s oil infrastructure is based. Petrobras' continued growth will also be vital for the country’s long-term prosperity, supporting efforts to lift Brazil’s workforce and social development.

Challenges Ahead for Petrobras

While PBR has an ambitious plan, it also faces significant challenges. Political pressure, particularly from president Luiz Inácio Lula da Silva, may require Petrobras to align its strategy with broader economic and social goals, such as job creation and local development. Additionally, the company must navigate global market volatility, including fluctuating oil prices and changing energy demand. Petrobras will need to stay flexible to remain competitive in an ever-changing global market.

PBR’s Prospects

If Petrobras’ $111 billion plan is approved, this will significantly strengthen Brazil’s position in the global oil market and reinforce its leadership in Latin America. The focus on exploration, refining and petrochemicals will help PBR maintain long-term growth. Moreover, PBR’s efforts to generate jobs, support local industries and ensure a stable energy future for Brazil will solidify its role as a key player in the country's broader economic development.

Overall, Petrobras' investment plan for 2025-2029 is a good move to maintain its dominance in the oil industry while contributing to Brazil’s economic and social growth. The success of this plan will depend on Petrobras’ ability to meet its ambitious targets and navigate the challenges ahead.

PBR’s Zacks Rank & Key Picks

Currently, PBR has a Zacks Rank of #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Petrofac Limited POFCY, Targa Resources Corp. TRGP and TechnipFMC plc FTI, each carrying a Zacks Rank #2 (Buy) at present. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Petrofac is valued at $64.84 million. This oil and gas equipment and services company operates across four segments including Onshore Engineering & Construction, Offshore Projects & Operations, Engineering & Consulting Services and Integrated Energy Services.

Targa Resources is valued at $43.39 billion. In the past year, its shares have risen 134.4%. TRGP is a leading provider of midstream energy infrastructure services in the United States. It offers a wide range of services, including gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids.

TechnipFMC is valued at $12.13 billion. This oil and gas equipment and services company currently pays a dividend of 20 cents per share, or 0.70%, on an annual basis. FTI is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry.

Zacks Investment Research

Energy stocks were higher late Monday afternoon, with the NYSE Energy Sector Index rising 1.5% and the Energy Select Sector SPDR Fund (XLE) climbing 1.4%.

The Philadelphia Oil Service Sector index was gaining 1.6%, and the Dow Jones US Utilities index was adding 0.8%.

Front-month West Texas Intermediate crude oil rose 3.2% to $69.15 a barrel while the global benchmark Brent crude contract advanced 3.2% to $73.33 a barrel. Henry Hub natural gas futures jumped 5% to $2.97 per 1 million BTU.

In corporate news, Petrobras shares were up 2.4% after the Brazilian oil major said Monday it plans to invest $111 billion over a five-year period from 2025 to 2029.

Eco Wave Power Global said Monday it received the final nationwide permit from the US Army Corps of Engineers for an energy project at AltaSea's premises at the Port of Los Angeles. Eco Wave shares surged 38%.

TOYO said Monday that it expects to ship 1.7 to 1.8 gigawatts of solar cells in 2024, slightly down from an earlier target of 1.9 GW, mainly due to lower deliveries to US customers affected by anti-dumping and countervailing duty investigations by the Department of Commerce and International Trade Commission. Its shares were rising 2.6%.

DTE Energy said Monday it's investing over $100 million to build three new electric substations across Michigan. Its shares rose 0.1%.