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Thursday, May 11, 2017

Petrobras (PBR) Inks Deal to Divest U.S. Refinery for $200M

Brazil oil giant Petroleo Brasileiro S.A. , aka PetrobrasPBA recently inked a deal to offload Pasadena Oil Refinery in Texas and some of the company's assets in Africa. Notably, the company had paid $1.2 billion to acquire the refinery but divested it for $200 million only.
Petrobras, which is still grappling with several corruption lawsuits, is also charged with bribery allegations associated with the purchase price of the refinery. Reportedly, the refinery's previous owner had paid bribes to Petrobras' officials for the acquisition of the plant. The new owner of the refinery is also likely to face legal charges as two litigation cases have been filed against the Pasadena Oil Refinery by Harris County and environmental groups for violating Texas air and water acts. The refinery faced criticism for being one of the most poorly managed and contaminated facilities in Texas for various accidents and emission releases over the years. However, the sale of the refinery could bring Petrobras closer to its $21 billion divestment goals for 2017-2018.
In a separate release, Petrobras informed that a Federal Court in Sergipe, Brazilrecently lifted a suspension order which had put a hold on the company's plan of divesting one of its subsidiaries, BR Distribuidora. The divestment had been halted as the court believed that the company should have been more transparent in its business related dealings information. However, Petrobras is reworking on its asset sale plans which are reviewed by several internal committees and submitted to the authorized bodies for approval. The news bought relief as it will help to reduce the company's huge debt load.
Pedro Parente, CEO of Petrobras, has announced several turnaround measures. These initiatives are expected to reduce the enormous debt burden under which the company has been reeling of late. Petrobras' 2017-2021 business plan aims to deleverage the company by reducing capital investment.  The company is focused on unloading its secondary and non profitable businesses and shift to profitable projects like deep water drilling.  Petrobras has garnered $13.6 billion since 2015 by divesting its oil fields, pipelines and other assets. From 40 assets worth $42 billion, Pedro Parente has set aside refineries for sale which are expected to reduce the debt load of about $120 billion - the highest among the publicly traded oil companies.
Zacks Rank and Key Picks
Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm operating in the exploration, refining, marketing, transporting, distribution and biofuels segments. The company currently carries a Zacks Rank #3 (Hold).
The company has outperformed the Zacks categorized Oil & Gas Emerging Markets Integrated industry quarter to date. During the aforesaid period, shares of Petrobras have increased almost 0.21% while the broader industry fell around 3%.
Better-ranked players in the broader energy space include Bellatrix Exploration Ltd BXE , McDermott International, Inc. MDR and Penn Virginia Corporation PVAC . All the three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Bellatrix reported positive earnings surprise of 58.54% in the trailing four quarters.
McDermott posted positive average earnings surprise of 387.5% in the preceding four quarters.
Penn Virginia posted positive average earnings surprise of 36.67% in the preceding four quarters.
The Best & Worst of Zacks
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