Petrobras Rating Upgraded By Moody's On Improved Liquidity
Zacks Investment Research | Apr 13, 2017 02:43AM ET
Brazil oil giant Petroleo Brasileiro S.A., aka Petrobras (NYSE:PBR) earned its second credit rating upgrade in the last five years as the rating agency Moody’s Investors Service raised the company’s corporate debt rating by one level to B1. Moody’s has also revised the outlook for all ratings from stable to positive, indicating that the company is no longer faces the risk of being downgraded any time soon. The positive outlook implies that further positive rating actions can occur provided the company's liquidity and overall credit risk continues to improve, making it more attractive for investments.
In Feb 2015, Petrobras lost its investment grade at Moody’s due to severe corruption charges against the company. Many of the company’s officials were arrested as a part of the Operation Car Wash investigation. In Feb 2016, the company was downgraded to the lowest speculative level. However, in Oct 2016, Moody’s had upgraded the company’s ratings to B2.
Further, a couple of days back, Moody’s upgraded all ratings for Petrobras on account of improving financial metrics and liquidity of the company in the recent quarters. The company’s debt refinancing transactions and disciplined operational management also attributed to the ratings upgradation and positive outlook.
Petrobras’ shares which had plummeted to around $3 in Jan 2016, rallied more than three times, closing at $9.66 as on Apr 12. This can be attributed to the company’s lower capital spending initiatives, increase in the oil prices, strengthening Brazilian currency and a favorable regulatory environment in Brazil. These tailwinds have improved the liquidity position and the overall financials of the company to some extent.
The new fuel pricing policy adopted by the company has also helped it to increase margins in the downstream operations. The company which is burdened by huge debt has reduced its capital investment for 2017–2021 by 25% not only to curb costs but also to clear debts.
Currently Petrobras is concentrating on improving its liquidity and operational performance. The company’s efforts to deleverage or at least refinance its debt obligations to extend its maturity also work in favor. The company’s rigorous divestment goals will help in reinstating its financial health by mitigating the leverage.
However, the company at present is reeling under immense debt burden which can’t be resolved smoothly until the cash flow is positive. Petrobras still has $8.8B in debt maturing in 2017 and another $11.3B maturing in 2018. Also, any negative developments from the pending litigation cases against the company may hamper the financials adversely. Therefore the state- run integrated energy company carries a Zacks Rank #3 (Hold).
Get The News You Want
The company has outperformed the Zacks categorized Oil & Gas Emerging Markets Integrated industry over the past year. During the aforesaid period, while shares of Petrobras rallied almost 46%, the broader industry gained around 28%.
Better-ranked players in the broader industry include Penn Virginia Corp. (NASDAQ:PVAC) , Antero Resources Corp. (NYSE:AR) and Crescent Point Energy Corp. (TO:CPG) . 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.
Pen Virginia reported positive average earnings surprise of 36.67% in the last four quarters.
Antero Resources reported positive average earnings surprise of 239.1% in the last four quarters.
Crescent Point Energy reported positive average earnings surprise of 127.2% in the last four quarters.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.