The listing of Petrobras, and more generally its economic and financial performance, is a kind of thermometer of the state of health of Brazil.
After the presidential elections, there is a strong expectation about the economic policy of the next Bolsonaro government, and Petrobras is certainly a fundamental element. Bolsonaro and Guedes have reiterated that Petrobras is a strategic company and that therefore it will not be privatized, but it is very probable that some of its activities not strictly related to the extraction and production of oil will be sold, fully or partially.
In recent days, the new president of Petrobras, Roberto Castello Branco, has been appointed. An economist and former member of the administration board of Petrobras, Castello Branco is a defender of privatization and from his command we expect a gradual concentration of Petrobras on its core business – in particular the exploration of the pre-sal – with the possible sale of non-strategic assets (including the subsidiary BR Distribuidora, a chain of fuel distributors, valued at about 27 billion reais, or about 7,3 US$ billion).
The preferential bond (PETR4) is quoted today at R$ 26, the same value as in May 2018, the date of my most recent post regarding Petrobras.
We recall the recent history of the Petrobras listing:
– in the first few months of 2018, the price of crude oil rose from US $ 50/52 to US $ 70, a 40% increase that helps a lot of Petrobras, the 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.
– to determine this positive result, in addition to the growth in the price of crude oil, the sale of 3 oil fields (for a value of R $ 3.2 billion) and the increase in sales margins on oil products contributed, thanks also to the price increase on the internal market.
– the indebtedness also decreased (about US $ 81 billion compared to US $ 100 billion in October 2017), however, postponing a strong ballast for industrial growth.
– today (22 November 2018) the PETR4 title is worth R$ 26.
What happened in the last six months?
Although the listing of PETR4 is the same as six months ago, the stock has gone through a period of remarkable ups and downs. After reaching the high of the year at R$ 27 on 16/5/2018 the stock began a so-decreasing, until reaching the minimum value of R$ 15 in mid-June 2018.
The truckers’ strike, which began in May and triggered by the rise in fuel prices, prompted the government to freeze the price of diesel, with a maneuver seen by the market to be very unfavorable to Petrobras.
The chaotic management of this crisis led to the resignation of the President of Petrobras, Pedro Parente, replaced by Ivan Monteiro from 1 June 2018.
During the pre-election period, PETR4 has recovered some of its value, but only with the increasingly solid forecast of the presence of Bolsonaro in the run-off has returned to the listing of R$ 26.
After the Bolsonaro election, which took place on 28/10/2018, the stock reached a new high of the year at R$ 28, before going back down to the current R $ 26.
The value of Petrobras shares is however still far from the historical highs, as can be seen in the graph below:
Petrobras share price from 2007 to mid-November 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):
In the post of May 2018 (https://updatebrazil.wordpress.com/2018/05/15/petrobras-great-again/ ) I warned about the uncertainty caused by the electoral period, and indeed the fluctuating trend of the Petrobras title did not reward investors.
Immediately after the election of Bolsonaro, the market became inflamed with optimism with Bovespa’s growth forecasts in some phantasmagorical cases. After the first days of euphoria, once the normal difficulties faced by the new government and the unfavorable international scenario have been noticed, caution has increased.
Monteiro has given continuity to the process of reducing the company’s debt (it is estimated that it will close 2018 with “only” R$ 69 billion debts) and to a management that has brought the financial statements back into business.
The results of Petrobras are strongly influenced by oil prices (today at US $ 63 a barrel, after having touched the 85 US $ in October) and by the trend of the world economy, which is facing a period of turbulence mainly due to the US-China trade war and US interest rate growth.
If the global economic situation will normalize quickly, Petrobras certainly has strong growth margins and can give great satisfaction to the investors.
Update Brazil 