Analysts expect announcement of unannounced profits, despite statements to the contrary from management
Petrobras releases on Thursday (March 7, 2024) data for the period from October to December 2023, after the market closes. The expectation of analysts from large banks is that the company will present stronger indicators in the quarterly comparison, but lower profits on an annual basis, amid the drop in oil prices in the period.
Investors will be paying particular attention to the possibility of the company paying extraordinary dividends, after recent statements by management that brought uncertainty about the extraordinary distribution.
The last few weeks have seen adjustments in investor expectations, following reports that pointed to prospects for robust extraordinary dividend payments. However, statements by the current director, Jean Paul Prates, indicated otherwise.
In an interview with Bloomberg At the end of February, Prates said that the company needed to be more cautious with the payment of dividends, which led to a drop in shares and the loss of R$30 billion in market value in just 1 day.
According to Prates, the nominee would be “more conservative than aggressive”, as the company wants to consolidate itself as a powerhouse in renewable energy. Prates also said that “Shareholders will understand.”
The company, however, clarified in a statement that it has not taken any decision regarding the distribution of dividends that have not yet been declared. Even so, the situation has brought skepticism to investors about the potential for payments.
“If on the one hand it is too early to interpret the possible impact of this news on the company's fundamentals, on the other hand, it is very easy to understand that the recent statements increase the perception of risk in relation to its thesis, with a natural impact on the perception of value of the company in relation to its fundamentals”highlights Genial Investimentos, in a report.
What to expect from the data
BofA (Bank of America) expects the state-owned oil company to present stronger sequential results, with revenues of US$26.306 billion, a quarterly increase of 5% and an annual drop of 11%, in addition to EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted of US$ 15 billion, an increase of 13% in the quarter and 10% in the annual comparison. BofA expects a profit of US$6.529 billion, an increase of 21% compared to the 3 immediately previous months, but a loss of 20% compared to the same period in 2022. “The key drivers of stronger quarterly performance are: higher production, lower exploration costs; and better downstream results.”
BTG bank estimates revenues of US$26.929 billion and adjusted EBITDA of US$14.578 billion. Net profit of US$7.106 billion would represent a loss of 13.7% in the quarterly comparison, but a quarterly increase of 30.3%. The bank's analysts list as factors for a stronger EBITDA on a quarterly basis greater oil production, lower extraction costs, in addition to premium diesel prices in relation to benchmarks of the Gulf.
Regarding dividends, BTG projects payment of US$3.7 billion based on the company's remuneration policy. Although there is the possibility of distributing another US$7.3 billion in extraordinary dividends, the bank estimates US$4 billion, considering that portion should be directed to the recently created capital reserve.
Santander expects another set of strong operating results, with an EBITDA of US$15 billion “also supported by continued strong refining margins and a quarterly increase in oil exports”. Revenues should total US$25.612 billion and profits US$7.817, according to Santander.
The expectation is for dividends of US$7.5 billion, with US$4 billion related to the payment of quarterly dividends (45% of the FCF dividend policy), and another US$3.5 billion in extraordinary dividends. “In our opinion, Petrobras' strong Q4 2023 should be largely driven by the 2% quarterly increase in domestic oil production, with profitability given the greater share of pre-salt in the mix, and continued strong crack spreads. ”say analysts.
Goldman Sachs has a similar outlook to the Bloomberg consensus for EBITDA at US$14.5 billion and indicates there is room for up to US$8 billion in potential extraordinary dividends. Even though the actions were corrected with Prates' speech, indicating a certain skepticism on the subject, “Q4 profit and the possibility of an extraordinary dividend remain viable in light of Petrobras’ strong cash flow generation”he states.
Itaú BBA estimates revenue of US$26.188 billion and US$15 billion in EBITDA in the 4th quarter, driven by higher production and better refining margins. The projected net profit is US$7.246 billion, an increase of 32.8% compared to the previous quarter, but a loss of 12.1% compared to the 4th quarter of 2022. In addition, Itaú BBA analysts expect a dividend payment of US$3.9 billion, according to the remuneration policy, which would imply a dividend yield of 3.6%.
Regarding possible extraordinary dividends, Petrobras could distribute estimated amounts between US$4.7 billion and US$8.5 billion in dividends to shareholders, according to the bank. “We tend to believe that the actual extraordinary dividend yield will be closer to the 4.2% lower limit of our estimated range. In this case, the company's total dividend yield for 2023 would be 18.7%, significantly higher than the yields of its global peers over the same period.”compares Itaú BBA.
Operational data
The average production of oil, natural gas liquids and natural gas reached 2.94 million barrels of oil equivalent per day in the 4th quarter of last year, an increase of 2.0% compared to the 3rd quarter, according to operational data already reported by company.
The expansion occurred, according to the state-owned company, due to the ramp-up platforms P-71, in the Itapu field, FPSO Almirante Barroso, in the Búzios field and FPSOs Anna Nery and Anita Garibaldi, in the Marlim and Voador fields. Furthermore, Petrobras mentioned as an upward factor the entry of 4 new wells from complementary projects in the Campos and Santos Basins, although the effects would have been offset, in part, by the natural decline of mature fields.
In the year as a whole, total annual production of oil and natural gas totaled 2,782 MMboed, 3.7% higher than in 2022. The increase was due to the entry into operation of the FPSOs Almirante Barroso, Anna Nery and Anita Garibaldi fields, as well as top of production at P-71 and FPSO Guanabara and start of operations in new wells in the Campos and Santos Basins.
“In addition, Petrobras achieved record production of 2.33 mbpd from pre-salt fields, which today represents around 79% of total production and continues to help reduce lifting costs”points out Santander, which also highlights the increase of approximately 6% compared to the previous quarter in oil exports, to 634 kbpd.
BTG sees positive risks for the guidance of production for 2024, indicating that production in the 4th quarter in Brazil was 7% above the guidance of the company for this year, reinforcing the view that the strategic plan appears conservative.
The stronger quarterly EBITDA is related to increased production in the interval, according to BofA. However, the utilization factor reached 94% in the fourth quarter, 2 percentage points below the record recorded in the 3rd quarter of 96%, he ponders.
Recommendations
BofA reinforces a buy recommendation for the stock, with a target price of US$20.20 per ADR and R$48 per share, given the prospect of substantial growth in production upstreamand the minimum dividend yields that are still attractive for 2024, as well as the pricing policy more aligned with international prices.
Meanwhile, BTG has a favorable outlook, indicating a purchase for the shares, in addition to considering the company as the main choice in the oil and gas sector this year, with a target price of US$19 for the ADRs. Santander reiterates its outperform rating for Petrobras, equivalent to purchase, with a target price of US$19 for ADRs.
Goldman Sachs also has a buy recommendation, with a target price of US$19.70 for ADRs, R$48.90 for common shares and R$44.40 for preferred shares.
Itaú BBA is the least optimistic of the banks, with a market performance indication, equivalent to neutral. The target price for preferred shares is R$38 and for ADRs is US$14.5.
With information from Investing Brazil.
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