Petrobras (PBR), the largest integrated energy firm in Brazil, stands to benefit from its country’s economic growth and huge pre-salt oil reserves. The company recently reported a better-than-expected third-quarter, helped by strong downstream results that more than offset the sharp decline in commodity prices.
Near- to medium-term concerns include the uncertain commodity-price scenario, significant capital investment requirements, and Brazil’s proposed new oil and gas regulatory framework. However, given its strong pipeline of development projects and impressive recent exploration successes, the company’s long-term outlook looks compelling.
As such, we recommend an Outperform rating for Petrobras ADRs. Our six-month target price is $55 per share.Zacks Investment Research
