Petroleo Brasileiro S.A. or Petrobras PBR recently commenced a sale process of 23 onshore and three shallow water oilfields along with a small refinery as it advances rapidly with its five-year divestment plan. Per management, the sell-off is in line with the company’s strategy to cut costs and improve its capital allocation.
This state-run energy giant informed that it initiated the teaser phase of the oilfields’ sale, collectively known as Polo Potiguar, alongside the nearby Clara Camarao refinery in the state of Rio Grande do Norte. Polo Potiguar is said to have produced approximately 23,000 barrels per day of oil and 124,000 cubic meters per day of natural gas in the first half of 2020. Meanwhile, Clara Camarao refinery with an installed capacity of 39,600 barrels per day joins the list of eight refineries that the company wants to divest. This particular asset contributes to 50% of Brazil's refining capacity.
The latest sales offer is part of the company’s policy to regain its financial footing by selling assets and curtailing debt as it continues to grapple with issues since a major corruption scandal broke years ago when it had accepted bribes from construction firms in return for awarding them contracts at inflated prices.
Petrobras has a target of selling assets worth $20-$30 billion over the next five years under its 2020-2024 investment plan. Earlier this year, it put the Papa-terra deep-water oilfield besides Golfinho and Camarupim fields up for sale. Asset sales are part of the company’s portfolio optimization strategy and accordingly, it had also put more than 100 mature onshore and shallow-water offshore fields up for auction. Although some of the areas are already sold out or are still in the sell-off process, divestiture of the deep-water oilfield in Campos Basin marks Petrobras’ transaction of higher-quality mature assets that still hold some upside potential.
Petrobras is the largest integrated energy firm in Brazil and one of the biggest in Latin America. The company’s activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks. The operations also include refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons apart from other energy-related operations.
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Petrobras currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Murphy USA Inc. MUSA, CNOOC Limited CEO and SilverBow Resources Inc. SBOW, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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