On May 10, Petrobras reached a market value of 360 billion reais (about 100 billion dollars), which gave it back the leadership among the Brazilian companies listed on the stock exchange, surpassing Ambev (beverages, 342 billion reais).

The preferential stock (PETR4) is quoted today at R $ 26, + 60% compared to the value of October 2017, the date of my most recent post regarding Petrobras.

Let’s recall the recent history of the Petrobras:

from January to October 2016 the preferential title (PETR4) had risen from a price of R$ 5 to a price of R$ 17.5, a decidedly spectacular performance especially in the context of economic and political crisis experienced by Brazil.

– despite the strong growth, in October 2016 the stock was still far from the most recent maximum value of R $ 24 of 2014 and even further from the offer price in the 2010 capitalization (R$ 29.65).

– arrived in October 2017, the pessimistic prospects have prevailed; in the middle of the month, the PETR4 stock was quoted at R $ 16.08, thus down by 8% compared to the listing at the end of October 2016. In the same period of time, the Ibovespa index rose by 18%.

– today (15 May 2018) the PETR4 title is worth R$ 26)


What has happened in the last eight months?

First, the price of oil rose from a quotation of US $ 50/52 per barrel in October 2017 to a quotation of around US $ 70 today. A 40% growth that helps a lot of Petrobras, a net oil exporter.

The simultaneous devaluation of the real against the dollar (about -13% from October 2017 to today), has further favored Petrobras: overall, the price of the barrel of oil has in fact grown more than 50% in the period considered.

Secondly, the economic result for the first quarter of 2018 – announced last week – showed a profit of R $ 6.9 billion, the best since the first quarter of 2013 and which guaranteed a distribution of R $ 652 million in dividends , the first since 2014.

To determine this positive result, in addition to the growth in the price of crude oil, the sale of 3 oil fields contributed (for a value of R $ 3.2 billion) and the increase in the sales margin on oil products, also thanks to the increase prices on the internal market.

Indebtedness is also down (about US $ 81 billion compared to US $ 100 billion in October 2017), but it remains a strong ballast for industrial growth, as the sale of assets with a value of US $ 21 billion continues., started to reduce the huge indebtedness necessary to finance the exploration of pre-sal.

Despite the excellent performance of the last few months, the value of Petrobras shares is however still far from the historical highs, as can be seen in the graph below:

10 years final

Petrobras share price from 2007 to mid-May 2018 – (source: Exame)


What to expect from the Petrobras title in the coming months?

Let’s see in the graph below the trend of the PN PETR4 (preferential) action in the last 12 months (source: Exame):

1 year final

In the post of October 2017 (https://updatebrazil.wordpress.com/2017/10/14/is-petrobras-at-a-turning-point-2017-october-16/) I had foreseen the possibility of a growth of the Petrobras stock in the short period, then occurred.

The next few months will be marked by one of the most uncertain presidential election campaigns of all time. The market has shown that it does not like a possible victory of Bolsonaro (currently leading the polls), whose populist attitudes do not guarantee the future maintenance of a strict fiscal policy and, therefore, the balance of public accounts.

The strong tension of the change with the dollar (today quoted at R $ 3.67) demonstrates how operators watch the Brazilian market with caution, even if for the moment the Brazilian stock exchange (Bovespa) continues to keep close to its historical maximum.

If populist candidacies, or in any case candidacies unwelcome to the market, should be strengthened in the coming months, the Bovespa blue chips (first of all Petrobras) could suffer a significant downsizing of quotations.

Personally I do not recommend buying Petrobras shares at this politically uncertain moment: I would expect greater clarity in the electoral scenario, which is likely to happen from July 2018.