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Petrobras Considers Sale of Pasadena Refinery to Lower Debt

Zacks Equity Research
Updated

Petróleo Brasileiro S.A. or Petrobras PBR recently announced its intention to divest its refinery in Pasadena, TX. Petrobras America Inc ("PAI"), the U.S. unit of the Brazilian state-run oil company, will open a non-binding phase for potential clients.

Per the company, it would sell its stake in Pasadena Refining System, Inc., PRSI Trading LLC and PRSI Real Property Holdings LLC, which are linked to the facility. The refinery has a storage capacity of 5.1 million barrels of oil and related products.

Notably, the 110,000 barrels per day processing unit faced a corruption scandal and witnessed several investigations. An audit court of Brazil, which is looking into the matter, suspects that the refinery's part acquisition in 2006 involved incidents of bribery. Petrobras took full control of the refinery in 2008. The Tribunal de Contas da União or TCU, Brazil's audit court estimated that due to the Pasadena refinery deal, Petrobras has incurred a loss of more than $580 million.

The divestment is in line with the company's strategy to reduce its huge debt burden and leverage. At the end of September 2017, the company had net debt of $88,143 million.

Price Performance

The company has gained 32.3% in the last year compared with 23.2% growth of its industry.

About the Company

Headquartered in Rio de Janeiro, Petrobras is one of the largest integrated energy firms in Latin America. The company’s activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons, besides other energy-related activities.  It mainly operates through six segments — Exploration and Production, Refining, Transportation and Marketing, Distribution, Gas and Power, and Biofuels and International.

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Petrobras is the largest publicly-traded Latin American oil company, which dominates Brazil’s oil and gas sector. The company produces most of Brazil’s crude oil and natural gas and accounts for almost the entire refining capacity of the country.

Zacks Rank and Stocks to Consider

Petrobras carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Cabot Oil & Gas Corporation COG, Suncor Energy Inc. SU and Pioneer Natural Resources Company PXD.  All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX -based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to grow 36% year over year. Earnings for 2017 are expected to be up 342.9%.

Suncor Energy is a Calgary, Canada based integrated energy company. Its revenues for the fourth quarter of 2017 are expected to increase 5.5% year over year. The company delivered a positive earnings surprise of 57.7% in the third quarter of 2017.

Irving, TX- based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its earnings for the first quarter of 2018 are expected to increase 15.6% year over year. Earnings for 2018 are expected to be up 147.8%.

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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report
 
Suncor Energy Inc. (SU) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Cabot Oil & Gas Corporation (COG) : Free Stock Analysis Report
 
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