Energy Petroleo Brasileiro SA Petrobras (ADR) (PBR) Maintain Neutral; Focus Remains On Fixing Balance Sheet

Petroleo Brasileiro SA Petrobras (ADR) (PBR) Maintain Neutral; Focus Remains On Fixing Balance Sheet

Published By News Desk at May 18, 2017 09:18 am Pre-salt production of 1.50mn bpd in April (gross output operated by Petrobras both for itself and its partners) was up 50% YoY, though remaining flat vs. Mar-17

Petroleo Brasileiro SA Petrobras's (ADR) (NYSE:PBR) total oil/gas production in Apr-17 was down 1.0% vs. Mar-17 to 2,716 kbpd and showed a mild 1.1% increase YoY. Domestic oil output for Apr-17 was 2,101 kbpd, down 1.0% MoM, although up 3.3% YoY. The monthly decline in output was mainly due to planned maintenance at P-37, located in the Marlim field (Campos basin) and at P-34 (Campos Basin) in the Barracuda and Caratinga Field. Domestic natural gas production of 78.5 mn m³/day was up 1.1% vs. Mar-17 and up a solid 6.1% vs. Apr-16. 

Pre-salt production of 1.50mn bpd in April (gross output operated by Petrobras both for itself and its partners) was up 50% YoY, though remaining flat vs. Mar-17. The strong year-over-year growth was helped by higher output due to the start of the Cidade de Saquarema FPSO (Lula Central field) and the Cidade de Caraguatatuba FPSO (Lapa field), in addition to higher output at the Cidade de Maricá FPSO (Lula Alto field), Cidade de Paraty FPSO (Lula Nordeste field) and Cidade de Itaguaí FPSO (Lula field). 

Bank of America Merrill Lynch has a positive view on Petrobras’s stock, especially related to its longer-term outlook, although it maintains a Neutral rating on Petrobras for BAML's 12-month view, given stock’s valuation in line with peers, despite a higher risk profile, in its view, very high level of debt, uncertainty related to possible material financial risks related to legal challenges/investigations (SEC; DoJ) and class action suits, and dependence of return to financial health on higher oil prices and progress in the asset sale program.