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Petrobras (PBR) to Divest Non-Core Assets Worth $587 Million
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Brazil's state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) recently reported that it has signed an agreement to divest non-core business assets worth $587 million. This move is to reduce its debts and revive investor confidence shattered by a corruption scandal. The company also expects to strengthen its position amid the dwindling markets.
Under the terms of the agreement, Petrobras has agreed to divest its 45.97% stake in sugar and ethanol producer Guarani SA. The buyer, France’s Tereos Internacional, is slated to pay $202 million for the buyout.
In a separate arrangement, Petrobras has agreed to divest certain petrochemical assets worth $385 million to Mexican petrochemical company Alpek S.A.B. de C.V. The petrochemical units, namely Petroquimica Suape and Citepe, are located in the state of Pernambuco and can produce 700,000 tons of purified terephthalic acid per year. The units also churn out 450,000 tons of polyethylene terephthalate per year.
The intention behind Alpek’s acquisition of Petrobras’ non-core investments is to expand its presence in Brazil, where it operates an expandable polystyrene plant.
The divestment plan of Petrobras, on the other hand, is in sync with its efforts to lower its huge debt burden. In fact, the company – with a debt of $122.65 billion at the end of third-quarter 2016 – is the most indebted in the world. As a result, Petrobras intends to divest assets worth $21 billion over 2017–2018. The company has already sold $13.6 billion in assets in 2015–2016. Through these initiatives, the company expects to achieve a net debt-to-EBITDA ratio of 2.5 times in 2018 as against 5.3 times at year-end 2015.
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company’s involvement in the multibillion-dollar money laundering and bribery case has not only hurt its goodwill but also put its credit rating at risk, making it difficult for the firm to find creditors.
Year to date, the Zacks categorized U.S. Oil and Gas Emerging Markets Integrated industry has registered an impressive growth of 61.91%. However, shares of Petrobras have outperformed the industry by registering growth of 143.02%.
Petrobras currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
In the last four quarters, Braskem posted an average positive earnings surprise of 105.5%.
Suncor, on the other hand, delivered an average positive earnings surprise of 40.55% in the last four quarters.
In the last four quarters, McDermott posted an average positive earnings surprise of 250.00%.
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Petrobras (PBR) to Divest Non-Core Assets Worth $587 Million
Brazil's state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) recently reported that it has signed an agreement to divest non-core business assets worth $587 million. This move is to reduce its debts and revive investor confidence shattered by a corruption scandal. The company also expects to strengthen its position amid the dwindling markets.
Under the terms of the agreement, Petrobras has agreed to divest its 45.97% stake in sugar and ethanol producer Guarani SA. The buyer, France’s Tereos Internacional, is slated to pay $202 million for the buyout.
In a separate arrangement, Petrobras has agreed to divest certain petrochemical assets worth $385 million to Mexican petrochemical company Alpek S.A.B. de C.V. The petrochemical units, namely Petroquimica Suape and Citepe, are located in the state of Pernambuco and can produce 700,000 tons of purified terephthalic acid per year. The units also churn out 450,000 tons of polyethylene terephthalate per year.
The intention behind Alpek’s acquisition of Petrobras’ non-core investments is to expand its presence in Brazil, where it operates an expandable polystyrene plant.
The divestment plan of Petrobras, on the other hand, is in sync with its efforts to lower its huge debt burden. In fact, the company – with a debt of $122.65 billion at the end of third-quarter 2016 – is the most indebted in the world. As a result, Petrobras intends to divest assets worth $21 billion over 2017–2018. The company has already sold $13.6 billion in assets in 2015–2016. Through these initiatives, the company expects to achieve a net debt-to-EBITDA ratio of 2.5 times in 2018 as against 5.3 times at year-end 2015.
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company’s involvement in the multibillion-dollar money laundering and bribery case has not only hurt its goodwill but also put its credit rating at risk, making it difficult for the firm to find creditors.
Year to date, the Zacks categorized U.S. Oil and Gas Emerging Markets Integrated industry has registered an impressive growth of 61.91%. However, shares of Petrobras have outperformed the industry by registering growth of 143.02%.
Petrobras currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Some better-ranked players from the broader energy sector include Braskem S.A. (BAK - Free Report) , Suncor Energy (SU - Free Report) and McDermott International Inc. . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last four quarters, Braskem posted an average positive earnings surprise of 105.5%.
Suncor, on the other hand, delivered an average positive earnings surprise of 40.55% in the last four quarters.
In the last four quarters, McDermott posted an average positive earnings surprise of 250.00%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>