Brazil's state-run energy giant Petroleo Brasileiro S.A., or PetrobrasPBR announced second-quarter earnings per ADR of 8 cents, lagging the Zacks Consensus Estimate of 15 cents.
A significantly larger tax outgo on account of an adjustment program and lower oil sales volume in Brazil were primarily responsible for the underperformance, partly offset by higher crude price and cost cuts.
Importantly, Petrobras generated free cash flows of $2,907 million for the quarter ended Jun 30 - positive for the ninth quarter in a row - reflecting operational improvement and lower investments. Moreover, adjusted EBITDA edged up 2% year-over-year to $5,934 million.
The troubled national oil company's net operating revenues of $20,823 million was ahead of the year-earlier sales of $20,320 million but was shy of the Zacks Consensus Estimate of $23,781 million.
Petroleo Brasileiro S.A.- Petrobras Price, Consensus and EPS Surprise
The Rio de Janeiro-headquartered company's total oil and gas production during the first half reached 2,791 thousand oil-equivalent barrels per day (MBOE/d) - 80% liquids - up from 2,710 MBOE/d in the same period of 2016.
Compared with the first half of 2016, Brazilian oil and natural gas production - constituting 96% of the overall output - increased 6% to 2,671 MBOE/d.
In the Jan to Jun period, the average sales price of oil in Brazil jumped 42% from the year-earlier period to $48.98 per barrel. This enabled Petrobras' upstream unit to earn $5,362 million in the first half, a massive improvement from the $628 million income in the year-earlier period.
During the first half, Petrobras' downstream unit earned $3,114 million, down 47% from the year-earlier period figure of $5,887 million. The underperformance reflects lower diesel and gasoline sales volume, plus lower domestic oil products sales volume.
During the period, Petrobras' sales, general and administrative expenses stood at $1,424 million, 4% lower than the year-ago period. Moreover, selling expenses fell by 2% to $1,969 million.
Capital Spending & Balance Sheet
During the six months ended Jun 30, 2017, Petrobras' capital investments and expenditures totaled $7,230 million, 7% lower than the $7,814 million incurred in the year-ago period. Also, over the past year, the company cut its workforce by 18% through a voluntary separation program.
This allowed the world's most indebted oil company to trim its massive debt load. At the end of the Jun 2017, the company had net debt of $89,263 million, decreasing from the $96,381 million as of Dec 31, 2016. Net debt-to-capitalization ratio during the first half was approximately 53%, down from 55% six months ago. Additionally, Petrobras finished the first semester with cash and cash equivalents of $23,569 million.
ADRs of Petrobras have lost 16.1% year to date, compared to the industry's 5.4% decline.
Zacks Rank & Stock Picks
Petrobras currently carries 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, one can look at better-ranked energy players like Range Resources Corp. RRC , Penn Virginia Corp. PVAC and TransCanada corp. TRP . All are Zacks Rank #1 (Strong Buy) stocks. You can see the complete list of today's Zacks #1 Rank stocks here .
Headquartered in Fort Worth, TX, Range Resources is an independent oil and gas company, engaged in the exploration, development and acquisition of oil and gas properties primarily in the southwestern, Appalachian and Gulf Coast regions of the U.S. The 2017 Zacks Consensus Estimate for this company is 45 cents, representing some 116.5% earnings per share growth over 2016. Next year's average forecast is 77 cents, pointing to another 69.5% growth. Range Resources has a VGM Score of "B".
Penn Virginia, based in Houston, TX, is an oil and gas company engaged in exploration, development and production of oil, NGLs and natural gas. The company has outperformed earnings estimates in the last 3 reported quarters.
TransCanada is a major North American energy infrastructure company. Over the past 30 days, the Calgary, Alberta-based firm has seen the Zacks Consensus Estimate for 2017 and 2018 increase 11% and 9%, to $2.36 and $2.65 per share, respectively.
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