Markets
PBR

Brazil Court Halts Petrobras' (PBR) $7-Billion Asset Sale

An image of a pencil and a calculator
Credit: Shutterstock photo

Petroleo Brasileiro S.A. or Petrobras ' PBR 2017-2018 divestment plans could be in jeopardy, as the Brazilian Federal court suspended the company's $7-billion deal with Engie SA. The court recently passed a ruling against the sale of Petrobras' natural gas pipeline unit, Transportadora Associada de Gás (TAG) to France-based Engie SA.

The company had announced the sale of its wholly-owned subsidiary, TAG, last year. TAG's gas pipeline system spanning 4,500 kilometers is primarily located in the north and northeast of Brazil. It can transport up to 74.7 million cubic feet per day, which is fully contracted through long-term agreements with ship-or-pay clauses.

The court halted the transaction due to discrepancies in the way Petrobras advanced with the sale. It is believed that the sale was not publicized well enough to stimulate ample competition. Petrobras is taking necessary legal steps to protect the interest of its shareholders.

The sale of TAG is major part of Petrobras' divestiture program of 2017-2018. The company plans to sell assets worth $21 billion over the said time frame. These divestment plans are in sync with the company's strategy to reduce its debt burden, and reinstate its investment grade rating and financial health. Further, it will also help the company gain additional liquidity, as it intends to increase investment in the ultra-deepwater projects.

As it is, with the resignation of the company's CEO, Pedro Parente, Petrobras has been thrown into disarray, with its shares falling sharply. The departure of Parente has raised speculations that the country may resort back to its old fuel pricing of subsidies that may again hamper the company's growth and economy. Moreover, with this latest unpleasant news about the suspension of $7 billion divestment deal, Petrobras might have a tough time ahead.

Zacks Rank and Key Picks

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

Petroleo Brasileiro S.A.- Petrobras Price

Petroleo Brasileiro S.A.- Petrobras Price | Petroleo Brasileiro S.A.- Petrobras Quote

Some better-ranked stocks in the oil and energy sector are Cheniere Energy, Inc. LNG , Occidental Petroleum Corporation OXY and Oasis Petroleum Inc. OAS , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Cheniere Energy's 2018 earnings are anticipated to grow 224.03% year over year.

Occidental's earnings for 2018 are expected to grow 360.67% year over year.

Oasis Petroleum delivered an average positive earnings surprise of 74.88% in the trailing four quarters.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

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

Petroleo Brasileiro S.A.- Petrobras (PBR): Free Stock Analysis Report

Oasis Petroleum Inc. (OAS): Free Stock Analysis Report

Cheniere Energy, Inc. (LNG): Free Stock Analysis Report

Occidental Petroleum Corporation (OXY): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

PBR OAS OXY LNG

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More