Bloomberg – Investors in Petrobras (PETR4), which saw a 25% rise in their stakes in 2023, should Now facing a series of downward reviews by analysts, Amid fears that below-market fuel prices and increased spending will undermine what have so far been a slew of multi-billion dollar profits.
Analysts at Citigroup Inc (C). HSBC Securities, JPMorgan Chase & Co. (JPM) shares revalued lower over the past week, Withdrawal of previous purchase recommendations for fear of changes in the new management team For the company it acquired this year after the election of the president Luiz Inacio Lula da Silva.
It is a matter of concern that the state oil company’s new fuel pricing strategy, in addition to the risk of re-launching its investment plans, will lead to an escalation of debt. During Lula’s last government, Petrobras subsidized politically sensitive fuel, prompting fears that the company would again use its money to help keep inflation in check.
CFO Sergio Caetano Light called analysts to meet in person this week to discuss the oil company’s outlook, according to people familiar with the matter. According to these sources, Fuel prices and dividends were the main points of talks held on Thursday In the morning, they asked not to be named because the information is not in the public domain. This meeting follows a call for results that will be held on Friday.
Petrobras representatives did not immediately respond to an emailed request for comment on the meeting.
Petroleo Brasileiro SA It would need to increase diesel prices by 36.2% and petrol by 24%. to import parity, according to financial services provider StoneX. Petrobras said it prioritized domestic market competitiveness over import parity in a new pricing policy introduced in May.
“We are now seeing an increase in capital spending,” the HSBC analyst wrote, adding to concerns about fuel prices and dividend payments, Liliana Yang In one report, the stock is downgraded to keep it from being bought. “This could be detrimental to shareholder dividends in the short term.”
Downgrading the stock, Citi analysts led by Gabriel Barra wrote in a report, downgrading the stock to neutral from Buy. . .
Last month, the Brazilian oil giant introduced a more conservative policy for shareholder payments, Dividend reduction from 60% to 45% of free cash flow. Lula criticized the company for flooding investors with cash instead of spending on priority projects such as refineries and renewable energy. Petrobras distributed more than 190 billion riyals ($38.836 million) in dividends last year alone, more than any other oil company except the Saudi Arabian Oil Company.
The company plans to allocate up to 15% of total investments to low-carbon projects that can reduce overall returns.
the Petrobras’ preferred stock is down nearly 20% from its peak in October, Before Lula won the elections. The stock is still up 25% this year, and some investors still see potential in the stock despite the lower dividend payout.
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