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Petrobras to Dispose of 49% Stake in Gas Distribution Unit

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Brazilian state-run energy player Petroleo Brasileiro S.A. or PetrobrasPBR said on Tuesday that it is in the last stage of discussion for divesting its 49% stake in a natural gas distribution player to Japan-based Mitsui & Co.

It is to be noted that the divestment awaits approval from the Brazilian regulators and the company's board of directors. Moreover, none of the companies has responded on the financial terms of the transaction.

The asset sale basically reflects Petrobras' intention to raise cash and improve its liquidity as it is saddled with huge debt. Raising cash either from the bond or equity market has become a formidable for Petrobras since it was caught red handed in a multibillion-dollar money laundering scam.

Hence, selling properties and raising cash is one of the few options that the company currently has.

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 activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks, as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

However, Petrobras' upstream operations continue to face challenges from weak crude prices. Despite an increase in production volume, second-quarter upstream segment earnings resulted in a year-over-year decline of over 62% owing to the sharp fall in commodity prices. Additionally, Petrobras' involvement in the money laundering and bribery case has put it credit rating at risk. The makes it difficult for the firm to find creditors.

As a result, Petrobras currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector are Tesoro Corporation TSO , Alon USA Partners, LP ALDW and Halcón Resources Corporation HK . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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TESORO CORP (TSO): Free Stock Analysis Report

PETROBRAS-ADR C (PBR): Free Stock Analysis Report

HALCON RESOURCS (HK): Free Stock Analysis Report

ALON USA PTNRS (ALDW): Free Stock Analysis Report

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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.

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