Brazil’s state-run energy giant, Petroleo Brasileiro S.A. or Petrobras PBR recently reported that it has signed an agreement to sell its Okinawa refinery and related assets to Japan’s Taiyo Oil for $129.3 million. The deal is in line with the company’s plans to raise cash and scale back international operations.
The refinery – Nansei Seikyu – currently fulfills about half the fuel needs for the Japanese island and has a capacity to produce 100,000 barrels a day. Additionally, the refinery includes three piers and 36 storage tanks that can hold 9.5 million barrels of crude and oil products.
In 2007, Petrobras had purchased 87.5% stake in Nansei Seikyu refinery for about $50 million from a subsidiary of ExxonMobil Corporation XOM. The company acquired complete ownership of the refinery in 2010. However, the company was forced to close refining operations at the facility last year and has been considering selling the refinery since then.
This deal is in line with the company’s plan to divest assets worth $15.1 billion for the 2015-2016 period to reduce its debt. Under this strategy, Petrobras has already divested assets in Argentina, Chile and Brazil. In July, the company sold its Carcara offshore field to Norway’s Statoil ASA STO for $2.5 billion. Notably, this was one of the biggest sales in the company’s history. Petrobras will have to undertake asset sales worth $6 billion to reach its goal after the sale of Nova Transportadora.
Petrobras, with net debt of around $103.56 billion, is the most indebted energy company in the world. The company is undergoing a deep financial crisis due to low oil prices and the loss of goodwill owing to the discovery of massive corruption within its ranks.
PETROBRAS-ADR C Price
Petrobras engages in the exploration, development, and production of crude oil, natural gas, and natural gas liquids. Additionally, the company sells crude oil and oil products produced at natural gas processing plants in domestic and foreign markets. It is also involved in the refining, logistics, transport, and trading of crude oil and oil products. Moreover, the firm exports ethanol and invests in petrochemical companies.
Petrobras currently carries a Zacks Rank #4 (Sell), which implies that the stock will underperform the broader U.S. equity market over the next one to three months.
Abetter-ranked player in the broader energy sector includes W&T Offshore Inc. WTI. The stock sports a Zacks Rank#1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last four quarters, W&T Offshore posted an average positive earnings surprise of 23.63%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research