In the worst-case scenario, stock could plummet to R$20 – Money Times

In this report, even more extreme conservative assumptions include the Petrobras expanding its efforts to
energy transition (Image: Bloomberg)

O Bradesco BBI set a pessimistic scenario for the Petrobras (PETR3;PETR4) with possible changes in the political cycle in Brazil.

“Given the uncertainties of Brazil’s political cycle, we are introducing a new ‘3.0’ scenario of more extreme assumptions after talking recently with energy sector advisors from some of the opposition parties running in the presidential elections”, he says.

In this report, even more extreme conservative assumptions include the Petrobras expanding its efforts to
energy transition and potentially trying to repurchase the vibrate (VBBR3).

“In terms of energy transition, one of the initial ideas we heard includes a merger between Petrobras and electrobras (ELET3), recently privatized, as well as Petrobras’ investment in offshore wind farms”, he says.

Analysts assume a leveraged buyout of all ON shares in ELET for $34 billion, in accordance with poison pill rules (protection mechanisms for minority shareholders of publicly traded companies against attempted takeovers by another investor), and investments in offshore wind farms for $15 billion.

In this way, its net debt would expand closer to $70 billion at the end of 4 years (net debt/EBITDA from 0.7x to 1.4x) from $42 billion.

“As a result, the actions of Petrobras they would need to drop to around BRL 20/share for the company’s EV to remain unchanged; close to $150 billion, as it has been for the past 8 years,” he says.

Bradesco considers 50% of this scenario to happen.

What if nothing changes?

Analysts view the company’s cash flow Petrobras during the next term of the Brazilian government (2023-26) being resilient to movements that do not necessarily add value.

“Under “status quo” assumptions and under a scenario of more conservative “2.0” assumptions, we believe that the company’s deleveraging would continue even assuming fuel prices below parity and the resumption of some refining projects”, he adds.

This scenario has 50% to happen, according to analysts.

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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