Petrobras devalues ​​23% since the 2nd round of elections

Petrobras lost R$103.6 billion in market value since the 2022 elections, from R$448.7 billion to R$345.1 billion. Preferred shares fell 25.5% in the period up to the close of Thursday (24 Nov 2022). Common shares fell 21.4%.

On Thursday, common shares recovered by 3.9% compared to the close of Wednesday (23 Nov). Preferred shares increased by 0.1%.

The most recent reduction, of 12.9% (preferred shares) and 10.6% (common shares), took place on Tuesday (22 nov) after the UBS bank downgraded Petrobras’ recommendation and reduced the share target price.

On the same day, Senator Jean Paul Prates (PT-RN), quoted to preside over the state-owned company, stated that he will ask for the suspension of Petrobras’ asset disposal processes, which intensified the fall.

In practice, the devaluation of Petrobras does not mean a loss of money. The state-owned company can recover the amount. The total devaluation, however, would be enough to cover 52.3% of the hole in the spending ceiling proposed by the transitional government, of R$198 billion.

On Tuesday (22 Nov), the UBS bank cut the target price for Petrobras shares from R$47 to R$22 per preferred share. He also recommended that his clients sell the company’s shares.

According to UBS, 3 points led to the nomination:

• fuel prices, due to the lack of definition about the new pricing policy and expectations of reduction in the state-owned company’s refining margins;
• investments, with the signaling of greater allocation of capital to projects in renewables and energy transition;
• increase in expenses accompanying the growth in investments.

UBS estimates that Petrobras must pay a payout of 25%, the minimum required by law. Payout is a rate calculated by dividing dividends paid by earnings per share.

On Thursday (Nov 24), Prates stated on his social networks that “the debate on fluctuations in the values ​​of Petrobras shares is being conducted lightly, which leads to a biased understanding of reality and that leaves room for interpretations, many times, liars.”

The senator declared that “it makes no sense to think of Petrobras as a cash cow for dividends.” In the 3rd quarter, the Board of Directors of the state-owned company approved the distribution of R$43.7 billion to shareholders, paid in two installments, in December and January.

The Brazilian state-owned oil company is the oil company that paid the most dividends in the quarter.

As a publicly traded state-owned company, Petrobras is subject to uncertainties involving its controlling shareholder, the Union.

In 2014, Petrobras shares fell with the oil crisis and the start of Operation Lava Jato. Then, in 2016, still in the context of a crisis in the price of a barrel, the market value of the state-owned company fell again when the price of oil fell below US$30.

In that year, Petrobras shares reached the lowest nominal value of the historical series from 2014: R$4.1, in January 2016, in the midst of the impeachment process of President Dilma Rousseff (PT). In 2017, another fall related to the accusation of Joesley Batista.

In 2018, the truck drivers’ strike over the price of diesel oil caused shares to plummet again. In 2020, already under the government of Jair Bolsonaro (PL), the reduction in oil consumption projections due to the covid-19 pandemic brought down the barrel price and Petrobras’ shares.

Then, with the appreciation of the price of a barrel, Bolsonaro’s statements about the rise in fuel prices and threats of government intervention in the state-owned company caused the shares to fall again. In February 2021, Bolsonaro fired the 1st president of Petrobras in his government, Roberto Castello Branco, because of the pricing policy.

On June 17, 2022, a statement by the president about Petrobras “plunging Brazil into chaos” over a further increase in fuel prices sent shares down 7%.

With information from Poder 360/Lais Carregosa

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