Tuesday, May 13, 2008

Petrobras (PBR) Business as Usual

As I've stated in the past, if the recent finds over the past 3-6 months offshore in Brazil are 50% of what they have been purported to be, I believe Petrobras (PBR) is on the way to being the largest company, by market capitalization, in the world. Very few stocks would I feel comfortable tucking under the pillow and then going on the 5 year, 'round the world yacht trip, but this is one. It will go up, it will go down, but over the years this is the type of company that should provide 20%+ type of annualized returns... until electric cars and solar panels dominate the planet. I care so much about their earnings that I didn't even realize they reported Monday... 90 day timeframes mean very little for this company but let's take a quick peak shall we? The one downer is the state control of pricing - good for Brazilian consumers and producers; not quite so good for PBR.
  • Brazilian state oil company Petrobras posted on Monday a 68 percent rise in its first-quarter net profit, beating market expectations, on higher oil output and prices of some fuels it sells.
  • Petroleo Brasileiro SA said net consolidated profit totaled 6.9 billion reais ($4.1 billion), up from 4.1 billion reais a year earlier. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose to 13.8 billion reais from 11 billion a year ago.
  • Net revenue rose 21 percent from the same quarter of 2007 to nearly 46.9 billion reais, largely in line with forecasts.
  • Oil production, or lifting, costs in Brazil jumped 20 percent from a year ago and edged up 1 percent from the preceding quarter to $8.66 per barrel.
  • Petrobras only partially profited from the rally in international oil prices in the first quarter, as the company kept its domestic oil and diesel prices unchanged during the period. (just imagine results if they had fulled priced product at market rates) The company, which has a near-monopoly on refining in Brazil, is free to set domestic gasoline and diesel prices, although the government had long exerted subtle pressure to keep prices down
The real story here will be what exactly is sitting 5 miles deep in the ocean off Brazil's coast...[Apr 14: Petrobras Just Went Vertical] This also appears to be Ken Heebner's newest favorite; and that guy is pretty darn smart.

Long Petrobras in fund; no personal position

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