Chevron vs. Petrobras: Is Either Oil Giant Worth Holding Onto Now?

Core Viewpoint - Chevron and Petrobras, both major players in the global Oil/Energy sector, are facing significant challenges that may lead investors to reconsider their long-term viability as investments [2][15][17]. Chevron Corporation (CVX) - In Q1 2025, Chevron reported cash flow from operations of $5.2 billion, a decrease of 23.5$47.6 billion, missing Zacks Consensus Estimates, with earnings dropping to $3.5 billion from$5.5 billion [3]. - The company's debt-to-total capitalization has risen to 16.6% after issuing $5.5 billion in new debt to fund dividends and buybacks, while quarterly buybacks have been reduced to$2.5–$3 billion from$4 billion [4]. - Concerns about the future of Permian production and the proposed Hess acquisition highlight the need for diversification amid cautious investor sentiment regarding shale [5]. - Chevron's forward P/E ratio stands at 17.55, significantly above the sector median, indicating potential for further multiple compression as earnings estimates decline [6]. Petrobras (PBR) - Petrobras reported a consolidated net income of $6 billion in Q1, a 25$10.4 billion from $12.1 billion, with revenues down 11.3$21.1 billion [9]. - Free cash flow declined by 30.7% year-over-year, raising concerns about the sustainability of its 9% annualized dividend yield, especially with Brent crude prices between $60 and$65 per barrel [10]. - The company faces significant political risks, with state influence affecting governance and capital deployment, and a strategic plan focusing on politically favored segments rather than core upstream assets [11]. - Petrobras's net debt has risen to $56 billion, with a net debt/EBITDA ratio of 1.45, up from 0.86 a year earlier, compounded by currency risk and regulatory challenges [11]. - The forward P/E ratio for Petrobras is 4.54, reflecting persistent political uncertainty and structural inefficiencies, with EPS estimates for the year dropping to$2.75 from $3.01 [12]. Price Performance - Year-to-date, Chevron's stock has decreased by approximately 7%, while Petrobras has seen a decline of over 8%, driven by weakening oil prices and concerns over state intervention [14]. Conclusion - Both Chevron and Petrobras are currently facing declining cash flows, rising debt, and other operational challenges, leading to a Zacks Rank of 5 (Strong Sell) for both companies, suggesting they may underperform in the near term [15][17].