Finally Some Good Developments For Petrobras (PBR, BP, XOM, CVX)

Energy

Published: June 19, 2012 11:36 am

Last Updated: April 27, 2020 9:22 pm

Petroleo Brasileiro S.A. (NYSE: PBR), or Petrobras, has been one painful oil stock for investors. In some cases, the ride has been even worse than the wealth destruction brought on by oil giant BP PLC (NYSE: BP). Now we may finally have some good news and it is well beyond just a price stabilization in oil after a multi-week downward trend.

There is talk that Brazil will finally allow for a price increase for gasoline. As this is a publicly owned state entity, in some ways it may actually be more like a utility until you consider that the dividend is so low. Word is out that the Energy Minster is open to price hikes and this would effectively add right to the bottom-line for Petrobras investors if it is actually approved.

Shares were up over 3% in Brazil’s local markets but the ADRs which trade in New York are now up 4.8% at $19.92. With a 52-week range of $18.16 to $35.10 this is one where any news that is not bad should be very welcomed by Wall Street.

BP PLC (NYSE: BP) is up 2.1% at $40.36 on the day and it was trading up around $60 before its Gulf of Mexico disaster. Petrobras shares are now down by more than half since the same time as the government stake sale pressured shares in recent years. So, Petrobras has been more of a wealth destroyer than the BP woes.

The DJIA’s oil stocks are up as well but not like Petrobras. Exxon Mobil Corporation (NYSE: XOM) is up 1.6% at $84.47 and Chevron Corporation (NYSE: CVX) is lagging with a gain of only 0.7% at $104.23 so far today.

Thomson Reuters has a consensus price target of almost $34.75 on the Petrobras ADRs, which implies more than 50% upside if they are correct. If the news is correct and the Brazilian oil giant gets to raise prices, then analysts are likely to start viewing Petrobras shares more favorably again.

JON C. OGG

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