Core Insights - Petrobras (PBR) is planning a strategic return to Nigeria's oil industry, focusing on deepwater exploration after a decade-long absence [1][2] - The renewed engagement aims to unlock mutual benefits for both Brazil and Nigeria, revitalizing a historical relationship dating back to the 1980s [2][12] - Petrobras' investment strategy includes a $111 billion capital expenditure plan, with $77 billion allocated specifically for exploration and production activities between 2025 and 2029 [5][14] Investment Strategy - Petrobras has increased its exploration and production budget by $4 billion, emphasizing both domestic and international growth, with Nigeria identified as a key target [5][6] - The company aims to leverage its technical expertise in deepwater production to tap into Nigeria's expansive offshore reserves [6][11] Bilateral Relations - The Strategic Dialogue Mechanism (SDM) between Nigeria and Brazil is expected to enhance collaboration and investment opportunities [3][4] - Nigeria's Ministry of Foreign Affairs has confirmed Petrobras' eagerness to engage in deepwater exploration, indicating a focus on sector-specific Memoranda of Understanding (MOUs) [4][12] Market Dynamics - Nigeria is actively seeking to attract foreign investment to revitalize its petroleum sector and increase production levels from declining fields [7][8] - The deepwater region in Nigeria remains largely underexplored but is considered highly prospective, with past discoveries confirming its hydrocarbon richness [10][11] Strategic Partnership - The return of Petrobras could signify a strategic realignment of Nigeria's upstream oil sector, creating a dynamic alliance between the two countries [12][14] - Petrobras' reinvestment is expected to bring not only capital but also technology and innovation to Nigeria's energy sector, while Nigeria offers high-growth opportunities in a liberalizing market [13][14]

Core Insights - Petrobras (PBR) is trading at a significant discount, but this may be justified due to multiple challenges the company faces [1][11] - Recent Q1 2025 earnings missed expectations, with earnings per share at 62 cents, below the Zacks Consensus Estimate of 92 cents, and revenues down 11.3% to $21.07 billion [1][9] Production and Costs - Average first-quarter production was flat at 2,771 MBOE/d, with a 12.7% increase in pre-salt lifting costs to $7.08 per barrel, impacting upstream margins [2] - Revenues from the pre-salt segment fell 6.3% year over year, while downstream income decreased by 50% to $367 million [2] Financial Health - Net debt increased to $56 billion, up $12 billion year over year, with a net debt-to-EBITDA ratio of 1.45 [3] - Free cash flow declined by 30% year over year, despite the company achieving its 40th consecutive quarter of positive free cash flow [3] Strategic Direction - Capital spending in Q1 reached $4.1 billion, with plans for further investments in state-driven initiatives, reminiscent of past missteps that led to poor capital allocation [3] - The company’s recent oil discovery in the Aram block may not significantly impact earnings or cash flow before 2027, as further drilling and tests are required [4] Market Performance - Over the past year, PBR shares have declined nearly 22%, underperforming peers ExxonMobil and Chevron, which saw declines of 9% and 13%, respectively [5] - The Zacks Consensus Estimate for Petrobras' 2025 EPS has dropped by 10.3% in the past 30 days, with next year's estimate down 15.6% [9] Valuation and Outlook - Despite a low forward P/E of 4.4, the stock's valuation is under pressure due to rising debt, falling margins, and political uncertainty [11] - Persistent challenges, including falling oil prices and strategic shifts toward non-core assets, complicate the investment outlook for Petrobras [12]

Core Viewpoint - Petrobras reported disappointing first-quarter earnings, with earnings per ADS of 62 cents, missing the Zacks Consensus Estimate of 92 cents and down from 75 cents a year ago, primarily due to lower downstream production and declining oil prices [1][2]. Financial Performance - Consolidated net income was $4,029 million, down from $5,420 million a year earlier, while adjusted EBITDA fell to $10,446 million from $12,127 million [2]. - Revenues totaled $21,073 million, an 11.3% decline from $23,768 million year-over-year, and also missed the Zacks Consensus Estimate of $21,639 million [2]. Segment Analysis Upstream (Exploration & Production) - Average oil and gas production was 2,771 thousand barrels of oil equivalent per day (MBOE/d), slightly down from 2,776 MBOE/d in the same period of 2024 [4]. - The average sales price of oil fell 9.1% year-over-year to $75.66 per barrel, leading to a revenue decline in the upstream segment to $15,067 million from $16,077 million [5]. - Upstream net income decreased by 14.7% to $4,987 million from $5,846 million in the first quarter of 2024, impacted by a 12.7% rise in pre-salt lifting costs to $7.08 per barrel [6]. Downstream (Refining, Transportation, and Marketing) - Downstream revenues were $19,989 million, down 9.9% from $22,190 million year-over-year, with profits falling to $367 million from $775 million [7]. - The decline in production volume and lower utilization negatively affected the downstream unit's income [7]. Cost Management - Sales, general, and administrative expenses were $1,534 million, a 13.8% decrease from the previous year, while selling expenses fell from $1,333 million to $1,090 million [8]. - Total operating expenses decreased by 4.9%, but this was not enough to offset the revenue decline, resulting in operating income dropping to $7,276 million from $8,984 million [9]. Financial Position - Capital investments and expenditures totaled $4,065 million, up from $3,043 million in the prior-year quarter [10]. - Petrobras generated a positive free cash flow of $4,536 million, although it decreased from $6,547 million in the same period last year [11]. - At the end of the first quarter, net debt rose to $56,034 million from $43,646 million a year ago, with cash and cash equivalents at $4,695 million [12].

Company Overview - Petrobras held its Q1 2025 Earnings Conference Call on May 13, 2025, featuring key executives including CEO Magda Chambriard and CFO Fernando Melgarejo [1][3]. Participants - The conference call included participants from major financial institutions such as Goldman Sachs, Bank of America, JPMorgan, and Morgan Stanley, among others [2]. Executive Team - The executive team present during the call included various directors responsible for different sectors such as Exploration and Production, Logistics, and Energy Transition [3].

[Interim Financial Information](index=2&type=section&id=Interim%20Financial%20Information) [Parent Company Interim Accounting Information](index=4&type=section&id=Parent%20Company%20Interim%20Accounting%20Information) The parent company reported a significant net income increase to R$35.2 billion in Q1 2025, with stable operating cash flow and growing shareholders' equity [Statement of Financial Position](index=4&type=section&id=Parent%20Company%20Interim%20Accounting%20Information%20%2F%20Statement%20of%20Financial%20Position) | Account Description | 03.31.2025 (R$ Thousand) | 12.31.2024 (R$ Thousand) | | :--- | :--- | :--- | | **Total Assets** | **1,548,166,000** | **1,569,110,000** | | Current Assets | 178,196,000 | 209,362,000 | | Non-Current Assets | 1,369,970,000 | 1,359,748,000 | | **Total Liabilities** | **1,548,166,000** | **1,569,110,000** | | Current Liabilities | 277,746,000 | 281,677,000 | | Non-Current Liabilities | 874,579,000 | 921,427,000 | | **Shareholders' Equity** | **395,841,000** | **366,006,000** | [Statement of Income](index=6&type=section&id=Parent%20Company%20Interim%20Accounting%20Information%20%2F%20Statement%20of%20Income) | Account Description | Q1 2025 (R$ Thousand) | Q1 2024 (R$ Thousand) | | :--- | :--- | :--- | | Sales Revenues | 121,652,000 | 115,376,000 | | Gross Profit | 58,419,000 | 59,463,000 | | Net Income Before Income Taxes | 52,619,000 | 34,291,000 | | **Net Income for the Period** | **35,209,000** | **23,700,000** | | Income per Share (Ordinary/Preferred) | 2.73 | 1.83 | [Statement of Cash Flows](index=10&type=section&id=Parent%20Company%20Interim%20Accounting%20Information%20%2F%20Statement%20of%20Cash%20Flows) | Cash Flow Activity | Q1 2025 (R$ Thousand) | Q1 2024 (R$ Thousand) | | :--- | :--- | :--- | | Net cash provided by operating activities | 41,765,000 | 40,628,000 | | Net cash used in investing activities | (500,000) | 3,847,000 | | Net cash used in financing activities | (37,259,000) | (40,338,000) | | **Net increase in cash and cash equivalents** | **4,006,000** | **4,137,000** | [Consolidated Interim Accounting Information](index=12&type=section&id=Consolidated%20Interim%20Accounting%20Information) Consolidated Q1 2025 results show strong performance with net income rising to R$35.2 billion, increased revenue, and robust operating cash flow [Statement of Financial Position](index=12&type=section&id=Consolidated%20Interim%20Accounting%20Information%20%2F%20Statement%20of%20Financial%20Position) | Account Description | 03.31.2025 (R$ Thousand) | 12.31.2024 (R$ Thousand) | | :--- | :--- | :--- | | **Total Assets** | **1,147,716,000** | **1,124,797,000** | | Current Assets | 124,853,000 | 135,212,000 | | Non-Current Assets | 1,022,863,000 | 989,585,000 | | **Total Liabilities** | **1,147,716,000** | **1,124,797,000** | | Current Liabilities | 173,828,000 | 194,808,000 | | Non-Current Liabilities | 576,285,000 | 562,475,000 | | **Shareholders' Equity** | **397,603,000** | **367,514,000** | [Statement of Income](index=14&type=section&id=Consolidated%20Interim%20Accounting%20Information%20%2F%20Statement%20of%20Income) | Account Description | Q1 2025 (R$ Thousand) | Q1 2024 (R$ Thousand) | | :--- | :--- | :--- | | Sales Revenues | 123,144,000 | 117,721,000 | | Gross Profit | 60,709,000 | 60,701,000 | | Net Income Before Income Taxes | 53,635,000 | 34,448,000 | | **Net Income Attributable to Shareholders** | **35,209,000** | **23,700,000** | | Income per Share (Ordinary/Preferred) | 2.73 | 1.83 | [Statement of Cash Flows](index=18&type=section&id=Consolidated%20Interim%20Accounting%20Information%20%2F%20Statement%20of%20Cash%20Flows) | Cash Flow Activity | Q1 2025 (R$ Thousand) | Q1 2024 (R$ Thousand) | | :--- | :--- | :--- | | Net cash provided by operating activities | 49,338,000 | 46,481,000 | | Net cash used in investing activities | (10,235,000) | (16,440,000) | | Net cash used in financing activities | (31,444,000) | (35,582,000) | | **Net increase/(decrease) in cash and cash equivalents** | **6,706,000** | **(3,924,000)** | [Notes to the Financial Statements](index=20&type=section&id=Notes%20to%20the%20Financial%20Statements) The notes detail accounting policies, segment performance, legal contingencies, debt structure, and financial risk management strategies [Sales Revenues](index=22&type=section&id=4.%20Sales%20revenues) - Total sales revenues increased to **R$123.1 billion** in Q1 2025 from R$117.7 billion in Q1 2024, driven primarily by higher sales of oil products in the domestic market[32](index=32&type=chunk) Domestic Revenue by Product | Revenue by Product (Domestic) | Q1 2025 (R$ million) | Q1 2024 (R$ million) | | :--- | :--- | :--- | | Diesel | 38,360 | 35,051 | | Gasoline | 17,340 | 15,868 | | Crude oil | 8,208 | 6,088 | | **Total Domestic Market** | **91,093** | **84,743** | Revenue by Geography | Revenue by Geography | Q1 2025 (R$ million) | Q1 2024 (R$ million) | | :--- | :--- | :--- | | Brazil | 91,093 | 84,743 | | China | 6,276 | 7,359 | | Europe | 6,133 | 6,014 | | United States | 3,985 | 7,286 | | **Total Foreign Market** | **32,051** | **32,978** | [Information by Operating Segment](index=25&type=section&id=8.%20Information%20by%20operating%20segment) - The Exploration and Production (E&P) segment was the primary driver of profitability in Q1 2025, contributing **R$29.2 billion to net income**, consistent with its performance in Q1 2024[41](index=41&type=chunk)[42](index=42&type=chunk) - The Refining, Transportation & Marketing (RT&M) segment's net income **decreased to R$2.2 billion** from R$3.8 billion year-over-year[41](index=41&type=chunk)[42](index=42&type=chunk) Q1 2025 Segment Performance | Segment Performance (Q1 2025) | E&P (R$ million) | RT&M (R$ million) | G&LCE (R$ million) | | :--- | :--- | :--- | :--- | | Sales Revenues | 88,169 | 116,819 | 10,867 | | Gross Profit | 48,454 | 7,053 | 4,307 | | **Net Income (Loss) of the period** | **29,228** | **2,155** | **(77)** | [Provisions for Legal Proceedings, Judicial Deposits and Contingent Liabilities](index=36&type=section&id=14.%20Provisions%20for%20legal%20proceedings%2C%20judicial%20deposits%20and%20contingent%20liabilities) - As of March 31, 2025, the company has estimated contingent liabilities classified as 'possible' loss totaling **R$249.6 billion**, a slight increase from R$248.6 billion at year-end 2024[97](index=97&type=chunk) - The Federal Supreme Court (STF) recognized in March 2024 that the company's calculation formula for the Minimum Remuneration by Level and Regime (RMNR) is valid, and the company is adjusting loss expectations accordingly[99](index=99&type=chunk) - On March 7, 2025, Petrobras and EIG entered into an agreement to end litigation related to Sete Brasil, with Petrobras paying EIG **US$ 283 million** to terminate the lawsuit[122](index=122&type=chunk) [Finance Debt](index=53&type=section&id=23.%20Finance%20debt) - Total consolidated finance debt **decreased to R$136.9 billion** as of March 31, 2025, from R$143.4 billion at year-end 2024[148](index=148&type=chunk) - The **average maturity of outstanding debt** as of March 31, 2025, is **12.19 years**, supported by significant unused revolving credit facilities totaling over **US$7 billion and R$6.3 billion**[154](index=154&type=chunk)[158](index=158&type=chunk) [Equity](index=57&type=section&id=25.%20Equity) - On January 29, 2025, the Board of Directors approved the **cancellation of 155.8 million treasury shares** without reducing share capital[167](index=167&type=chunk) - The Annual General Meeting on April 16, 2025, approved **total dividends for 2024 of R$73.9 billion**, including a supplementary dividend of R$9.1 billion[170](index=170&type=chunk)[171](index=171&type=chunk) [Financial Risk Management](index=60&type=section&id=26.%20Financial%20risk%20management) - The company uses portions of its US dollar-denominated debt as hedging instruments for foreign exchange risk, with a notional value of **US$68.8 billion** as of March 31, 2025[192](index=192&type=chunk)[193](index=193&type=chunk) - A sensitivity analysis shows that a **20% adverse price variation** in open commodity derivative positions could result in a **loss of R$511 million**[203](index=203&type=chunk)[206](index=206&type=chunk) [Subsequent Events](index=73&type=section&id=29.%20Subsequent%20events) - On May 12, 2025, the Board of Directors approved the distribution of interim dividends and interest on capital for Q1 2025 totaling **R$11.7 billion**[240](index=240&type=chunk)[241](index=241&type=chunk) [Statement of Directors and Independent Auditors' Report](index=76&type=section&id=Statement%20of%20Directors%20and%20Independent%20Auditors%27%20Report) Directors affirmed the interim financial statements, and the independent auditor's review found no material misstatements according to accounting standards - The Board of Directors declared that they reviewed, discussed, and agreed with the Interim Financial Statements for the period ended March 31, 2025[243](index=243&type=chunk)[247](index=247&type=chunk) - KPMG Auditores Independentes Ltda. issued a review conclusion stating that **nothing came to their attention** that would cause them to believe the interim financial information was not prepared in all material respects according to relevant accounting standards[253](index=253&type=chunk)

Core Insights - Petrobras has secured a new contract with Portobello, Brazil's leading ceramic manufacturer, for the supply of natural gas, marking a strategic entry into the ceramics industry and expanding natural gas supply in Brazil's free market [1][2][4] Petrobras' Strategic Move - The agreement with Portobello signifies Petrobras' diversification into the ceramics sector, which is a growing and competitive market in Brazil, enhancing its ability to provide customized energy solutions [2][3] - This partnership reinforces Petrobras' ambition to cater to various industrial sectors, showcasing its adaptability in offering cost-effective and operationally efficient natural gas solutions [3][4] Strengthening Market Position - The partnership strengthens Petrobras' role in Brazil's free natural gas market, which has traditionally been dominated by state-run companies, allowing for more flexible, market-based contracts [4][5] - Petrobras aims to grow its portfolio in the free natural gas market, focusing on delivering a diverse range of gas products with flexible contract models [5] Infrastructure Investment - Petrobras is committing over $7 billion to develop critical infrastructure, including storage facilities, pipelines, and distribution networks, to meet the increasing demand for natural gas across various industries [6][7] - These infrastructure investments are essential for providing secure and scalable natural gas solutions, benefiting not only Portobello but also other industrial players in Brazil [7] Portobello's Competitive Edge - For Portobello, the partnership is crucial for enhancing energy efficiency and competitiveness, as reliable energy sources are vital for maintaining market leadership [9][10] - Access to natural gas allows Portobello to optimize operations and improve profitability, while also reducing exposure to fluctuating energy prices [10] Future of Natural Gas in Brazil - The partnership highlights the growing importance of natural gas in Brazil's industrial energy landscape, as companies seek to optimize energy use while maintaining productivity [11][12] - Petrobras positions itself as a valuable partner by offering flexible contracts and cost-effective natural gas solutions, catering to the rising energy demand from various industries [12] Conclusion - The agreement between Petrobras and Portobello represents a commitment to supporting Brazil's industrial growth and energy sustainability, utilizing natural gas as a primary energy source for a competitive future [13]

Core Viewpoint - Petrobras is expected to report a decline in revenues for Q1 2025, with earnings per share (EPS) estimates revised downward by 14% over the past month, indicating a challenging operational environment despite a projected year-over-year improvement in EPS [1][16]. Financial Performance - The Zacks Consensus Estimate for Q1 2025 EPS is 92 cents, with revenues expected to be $21.7 billion, reflecting an 8.7% year-over-year decrease [1][2]. - For the full year 2025, the revenue estimate is $83.9 billion, indicating an 8.2% decline year-over-year, while the EPS estimate is $2.79, suggesting a contraction of approximately 6.4% [2][3]. Production and Sales - Petrobras is projected to experience a marginal 0.2% year-over-year drop in oil and gas production to 2.77 million barrels of oil equivalent per day (boed) in Q1 2025, with crude oil output declining by 1% to 2.21 million barrels per day (bpd) [7]. - Total oil, gas, and derivatives sales decreased by 1.9% to 2.86 million boed, with exports falling 10.4% year-over-year to 760,000 bpd, primarily due to reduced shipments to China and the U.S. [8]. Market Position and Valuation - Petrobras stock has declined by 12% year-to-date, underperforming compared to American supermajors like ExxonMobil and Chevron [9]. - The stock trades at a forward price-to-earnings (P/E) ratio of 4.10, significantly lower than ExxonMobil and Chevron, which trade around 15X earnings, reflecting concerns over political risks and government influence [13]. Economic and Market Conditions - The company's earnings are closely tied to oil prices, which are trending lower amid recession fears and geopolitical tensions, potentially impacting revenue and margins [15]. - The broader economic slowdown could further squeeze margins, with Petrobras facing challenges in maintaining dividend potential amidst high-cost exploration plans and increasing capital expenditures [15][17].

Summary of Latin America Oil & Gas Insights Industry Overview - The report focuses on the oil and gas industry in Latin America, highlighting the region's path to energy security and production growth through 2030 [1][15][19]. Key Insights Oil Production Growth - Latin America is expected to see a compound annual growth rate (CAGR) of approximately 3% in oil production, translating to an increase of about 1.6 million barrels per day (Mbpd) by 2030 compared to 2024 [1][32]. - Brazil, Argentina, and Guyana are identified as the primary drivers of this growth, with Brazil's production expected to increase significantly due to pre-salt developments [16][20][30]. Regional Dynamics - The region is self-sufficient in liquid hydrocarbons and is forecasted to increase net exports by approximately 430,000 barrels per day (Kbpd) by 2030, which is a 21% increase from 2024 levels [16]. - Brazil and Argentina are projected to contribute 1.2 Mbpd in production growth from 2025 to 2027, exceeding consensus expectations by about 6.5% [16]. Economic Implications - Oil production is crucial for the sovereign credit ratings of countries like Ecuador, Argentina, and Mexico, with positive implications for Argentina's bonds but negative for Ecuador and Pemex [17]. - Fiscal revenues from oil are recovering post-pandemic, with projections indicating a decline of 28% in 2025 to approximately US$62 billion, but a potential increase to US$90 billion by 2030 if oil prices stabilize at US$70 per barrel [19]. Investment Opportunities - The report emphasizes the attractiveness of Petrobras in Brazil and YPF in Argentina, with Petrobras being highlighted as a strong risk-reward investment in Latin America [18][30]. - The Vaca Muerta shale play in Argentina is noted for its significant production potential, with expectations of a 60% increase in rig count by 2030, leading to a substantial rise in production [79][86]. Challenges and Risks - Mexico and Colombia face challenges with declining production and limited foreign investment, which could hinder growth [34]. - The report warns of potential risks to production figures if oil prices fall below US$60 per barrel, particularly affecting Pemex's funding capabilities [42]. Future Outlook - The report forecasts a 2.9% CAGR in oil production in Latin America from 2025 to 2030, with Brazil, Argentina, and Guyana expected to add approximately 1.0 Mbpd, offsetting declines in other regions [32][34]. - The pre-salt oil fields in Brazil continue to show strong productivity, with new developments expected to sustain growth through the end of the decade [49][50]. Additional Considerations - The report highlights the importance of National Oil Companies (NOCs) in driving energy security and trade surplus in the region, with a projected average trade surplus of 2.2 Mbpd through 2030 [27][28]. - The Equatorial Margin in Brazil is identified as a future exploratory frontier, with significant potential for new discoveries, although development timelines may extend into the mid-2030s due to regulatory challenges [58][59]. This comprehensive analysis provides a detailed overview of the current state and future prospects of the oil and gas industry in Latin America, emphasizing key players, economic implications, and potential investment opportunities.

Core Viewpoint - The CEO of Petrobras (Brazilian National Oil Company) is pressuring suppliers to adjust prices due to a significant drop in oil prices [1] Group 1 - Petrobras is experiencing a substantial decline in oil prices, prompting the need for price adjustments from suppliers [1]

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