Regions

Petrobras price target revised, lowered

October 4
10:34 PM 2015

Considering the adverse conditions being faced by the Brazilian oil and gas company, Petroleo Brasileiro Petrobras' price estimate has been revised down to $7.41 a share from $10.80.

The new price estimate is 11.8 times of earnings per share forecast of $0.63 for on the full year basis. The continuous drop in oil price and weakening Brazilian currency and S&P downgrade are impacting the company's performance in a more negative way.

Adding to this, Petrobras' net realization per barrel for upstream and downstream both the segments is falling significantly. This is expected to result in 28 percent drop in total sales for 2015 year. 

The dividend payout is expected to be lower by 80 percent to $0.19 for 2015, forecast analysts. In a surprising decision, Petrobras has decided to raise the price by six percent for gasoline and four percent for diesel.

The Brazilian multinational energy major is engaged in upstream and downstream operations in the oil and gas industry. Petrobras is a major corporate conglomerate in Latin America by sales revenues. It accounts for lion's share of Brazilian oil and gas industry. Petrobras' average daily crude oil production of 2,034 barrels per day is over 90 percent of Brazil's total oil production. 

The oil price drop for the most of the year squeezed revenues at Petrobras in 2015 so far. However, Petrobras raised its crude oil and natural gas liquid production during the first half of 2015 when compared to the previous corresponding period. 

The new price estimate is 11.8 times of diluted earnings per share forecast of $0.63 for on the 2015 full year basis. Petrobras' average price realized per barrel eased to $41 in the first half of 2015 from $80 in the first half 2014.  

The Petrobras share price forecast for next 12 months is pegged at $15 on a high estimate, $7.35 on a medium estimate and $2 on low estimate, according to forecasts made by 14 analysts. Petrobras paid a dividend of $0.96 in 2014 and this was 82 percent higher than the previous year. For 2015, the dividend payout is expected to ski by 80 percent to $0.19, forecast analysts.

The downstream operations at Petrobras were also reeling under pricing pressure. The average price realized of refined products per barrel went down to below $95 in the first half of 2015 from $128 in the first half of 2014. This level is likely to be continued for the remaining part of the year. Considering the drop in downstream and upstream realizations, the expected decline in total revenues is pegged at 28 percent for whole 2015 year. 

Petrobras has raised fuel prices and this boosted rally in bonds and shares. The major hike price will be six percent for gasoline and four percent for diesel effective from 30 September. The last time, it raises price was in November 2014. This is expected to add to the revenues by $1.7bn before interest, taxes, depreciation and amortization (EBITDA), according to Bank of America.

Since the oil price in the global market is in the range of $50-60 per barrel, market analyst forecasted that there wouldn't any major recovery for the rest of the year. The ongoing confrontation between Opec and non-Opec is diluting chances of upsurge in oil price for the time being. Organization of oil exporting countries (OPEC) is not agreeing on slashing down production level.

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