Petrobras to Sell Off Its Fully-Owned Araucaria Fertilizer Firm
Petroleo Brasileiro S.A. or Petrobras PBR recently commenced the sale process of its fertilizer firm Araucária Nitrogenados S.A., located in the state of Parana. The state-run energy giant is the sole owner of this stake and plans to sell 100% operating interest in the project. Per management, the sell-off is in line with the company’s strategy to cut costs and improve its capital allocation, thereby boosting shareholder value.
Araucária produces nitrogen fertilizers and has a production capacity worth 1,975 tons/day of urea and 1,303 tons/day of ammonia. However, Araucária’s main plant is currently shut down and reopening of the plant's production or its transformation for any other purpose will be the future buyer’s responsibility.
Last week, Petrobras lowered its capital spending guidance involving oil exploration and production (E&P) for the next four years in response to the coronavirus-induced weak market scenario.
Petrobras expects to spend approximately $40-$50 billion for exploration and production between 2021 and 2025 compared with the prior outlook of $64 billion announced in the 2020-2024 strategic plan.
Management confirmed that the weak Brazilian real and the overall lower Brent crude prices trimmed the investment view in dollar terms. The company is now targeting projects that will break even at $35 per barrel of oil.
Petrobras is also planning new asset sales as part of its policy to regain financial footing by divesting its assets and reducing debt. This is because the company continues to grapple with issues like an unexpected drop in oil prices and a dent in global demand due to the novel coronavirus outbreak that took a toll on oil and energy entities. These downsides in turn forced the industry players to delay their expansion plans and decrease capital expenditures to preserve liquidity.
Company Profile
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.
Zacks Rank & Key Picks
Petrobras currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Murphy USA Inc. MUSA, Laredo Petroleum, Inc. LPI 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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Petroleo Brasileiro S.A. Petrobras (PBR) : Free Stock Analysis Report
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