Petrobras Prices Notes - Analyst Blog
Brazilian state-run energy giant, Petroleo Brasileiro SA or Petrobras ( PBR ) announced the pricing of its euro and pound denominated notes. The company intends to use the proceeds to finance its $237 billion 2013-2017 Business and Management Plan.
The largest offering was that of the €1.5 billion 4-year note, priced at 99.705% and yielding 2.829%. Petrobras also put on offer a €750 million 7-year note priced at 99.402% and with a yield of 3.849% as well as an €800 million 11-year note priced at 99.204% and with a yield of 4.845%. Moreover, the company priced the £600 million 20-year note at 98.845% and with a yield of 6.732%.
The offering is expected to close on Jan 14, 2014. According to a person well informed about the deal, the offering received huge response from investors with the issue getting over €12 billion.
Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The long-term outlook on the company looks promising with its strong pipeline of development projects and impressive exploration successes. Also, the fact that the Brazilian government has allowed Petrobras to raise diesel prices is encouraging.
However, this ambitious five-year investment program could substantially increase the company's leverage and deteriorate its credit metrics during the current downturn in the economic cycle. Additionally, the company's declining production trend is a concern.
Headquartered in Rio de Janeiro, Petrobras currently holds 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 consider better-ranked players in the energy sector like Harvest Natural Resources Inc. ( HNR ), Seadrill Partners LLC ( SDLP ) and Athlon Energy Inc. ( ATHL ). All these stocks currently sport a Zacks Rank #1 (Strong Buy).