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Petrobras (PBR) Taps Chinese Banks for Deepwater Oil Expansion

Petrobras (PBR), Brazil’s state-owned oil and gas company, is tapping Chinese banks to finance its deepwater oil expansion in order to strengthen ties with the world's second-largest economy, per a Bloomberg report.

According to the report, Petrobras is actively engaging with Chinese financial institutions to secure loans not only for itself but also for its equipment and service suppliers. The company’s chief financial officer, Sergio Caetano Leite, emphasized the objective of ensuring ample and affordable capital for deepwater oil ventures in Brazil's South Atlantic. Chinese financial institutions already contribute more than a quarter to Petrobras' loans. Leite expects this proportion to increase in the future despite the company's commitment to maintaining total liabilities below $65 billion. This initiative aligns with PBR's rapid growth and expansion plans.

The recent agreements with China Development Bank and the Bank of China reinforce the growing financial collaboration. The move coincides with Brazil’s president Luiz Inacio Lula da Silva's pursuit of Chinese investments to reindustrialize the country’s economy. China stands as Brazil's largest trading partner, accounting for nearly a third of its total exports.

Many of Petrobras' critical Floating Production, Storage and Offloading (FPSO) vessels are sourced from Chinese shipyards. This proximity facilitates access to Chinese loans, crucial for vessels costing up to $3.5 billion each. Moreover, Chinese banks are set to support Petrobras in financing renewable energy endeavors, highlighting a broader commitment to sustainable energy solutions.

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Additionally, the company boasts the largest and most rapidly expanding FPSO fleet worldwide. According to Leite, PBR plans to incorporate an additional 14 FPSOs by the end of 2027. This goal could be achieved more cost-effectively if the company’s suppliers enjoy improved access to credit. Petrobras is also exploring the possibility of establishing a Chinese subsidiary in the coming year, with a focus on finance and procurement.

Zacks Rank & Key Picks

Currently, PBR carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy sector are Range Resources Corporation RRC, currently sporting a Zacks Rank #1 (Strong Buy), and Baker Hughes Company BKR and Core Laboratories Inc CLB, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Range Resources is among the top 10 natural gas producers in the United States with a diversified asset portfolio spread between low-risk and long reserve-life Appalachian assets. The company’s extensive inventory of Marcellus resources with low breakeven points is a significant asset. RRC has witnessed an upward earnings estimate revision for 2023 and 2024 in the past seven days.

Baker Hughesis one of the world’s largest oilfield service providers. The company’s integrated oilfield products and digital solutions help customers efficiently and cost-effectively refine and transport hydrocarbons with low environmental concerns.BKR has witnessed an upward earnings estimate revision for 2023 and 2024 over the past 30 days.

Core Laboratories’ strong presence in the emerging shale plays and its global footprint will provide for steady growth rates going forward. CLB’s technology-heavy portfolio of proprietary products and services gives it the opportunity to optimize production from new and existing fields. It has witnessed an upward earnings estimate revision for 2024 in the past 60 days.

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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report

Core Laboratories Inc. (CLB) : Free Stock Analysis Report

Range Resources Corporation (RRC) : Free Stock Analysis Report

Baker Hughes Company (BKR) : Free Stock Analysis Report

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