March 26, 2023

Relief for the petty oil companies after the storm? The BBI says the signs of congressional opposition to taxes are good news for stocks

After the storm, the calm? After two sessions of strong pressure on oil stocks following news of a tax on exporting crude oil and with the government ordering Petrobras (PETR3; PETR4) to suspend the sale of its assets for 90 days, sector companies may have reason to celebrate this Thursday (2).

In a report, Bradesco BBI cites news and a political consultants’ assessment that Congress rejects the idea of ​​perpetuating an export tax, which would then only be in effect for the four months specified by the government’s temporary measure, which was announced on Tuesday (2). / 28).]

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The report cites a speech by Senator Nelsinho Trad (PSD-MS), who stated that “the creation of this tax could have material negative effects on the industry, including smaller investments in the country.” In addition, also quoting the media, the government would not have included Arthur Lyra (mayor) in a debate on export taxes nor intend to get involved in the issue of the interim measure.

According to BBI analysts, the continuation of the tax, which was imposed at a rate of 9.2%, was seen as the biggest risk. The bank cites parliamentarians’ overall assessment that the tax could harm Brazil’s oil industry. They indicated, “We agree.” For them, in addition to discouraging investment, the tax can also lead to various disputes.

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Meanwhile, if the prime minister expires in July, the financial impact will be limited to 4 months, which will cause stocks to rebound. Analysts see PRIO (PRIO3) as expected to see the strongest rebound in the news, as it will be the company most affected by export taxes. In addition, the company also reported that Frade’s new producing well, MUP5, has stabilized initial production at around 8,000 b/d, which was read as positive news.

Analysts say its peers, 3R (

However, he points out, specifically, regarding the purchase by 3R of Pole Potiguar from Petrobras, BBI believes there are still good chances of completing the transaction.

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Among the points, the deal does not await the signatures of Petrobras management and, therefore, the new executives should not be involved in the negotiations. There is also no contractual penalty if Petrobras withdraws from the transaction – which is a positive thing, in BBI’s view, as it removes the flexibility of that possibility (if Petrobras decides to withdraw from the transaction, that would have to be done through the courts). The closing of the operation is still in effect automatically under the contract following Ibama’s approval, which should be issued in mid-March, approval by the National Ports Agency (which occurred this week) and 3R certifying that it has the cash to pay the takeover balance (which company has). “Therefore, we believe that the chance of selling the Poteguar mogul is greater than the risk of the sale failing,” say the analysts.

Oil start-ups were mostly higher Thursday afternoon (2), with a focus on PRIO, with a 4.40% lead, at R$34.85, around 2pm (Brasilia time) followed by PetroReconcavo, with a 3.82% rise at R$28.01. BR, and 3R, with a modest uptick of 1.29%, at R$33.02. Enauta (ENAT3) is an exception, down 2.11% at R$12.99.

Despite the positive reading about the MP’s developments on the export tax, Bradesco BBI believes that “there are still scars” for the sector. He estimates that “risk perception should increase for the sector, as it may be the target of other measures, if the government deems it necessary.”

Moreover, when the temporary measure expires, in July, BBI believes Petrobras will already have it
pricing policy.

Results are also on the radar

It should be noted that PRIO and Enauta released their results the night before.

XP notes that PRIO’s numbers were weak, with EBITDA (Ebitda, its English acronym) of $121 million, 5% below its forecast and a year-over-year decline of 47%. “The decline was mainly due to lower-than-expected net revenue, impacted by higher-than-expected discounts, partially offset by lower-than-expected costs,” he notes.

However, it did highlight two positive themes. The first is the commissioning of the aforementioned MUP5 well in Campo dei Frade. In addition, the company has reached the lowest cost of extraction in history, at $8.6 per barrel (from $9.5 per barrel in Q3 2022).

For the Itaú BBA, looking ahead, the first quarter of the year promises to be a turning point in terms of production, given the contribution of Albacora Leste and the recent developments in Frade’s revitalization plan.

As for Enauta, BBA notes that the numbers were higher than its expectations, with a focus on Ebitda of R$463 million, 7% higher than the bank’s estimate. The result was driven by increased production at the Atlanta field and lower cost of lift (the average operating cost of extracting each barrel of oil), partially offset by lower oil prices in the quarter. The company confirmed that it remains focused on the strategy of growth and diversification of revenues through the acquisition of other assets.

Morgan Stanley, which has a Neutral breakeven recommendation for the stock, notes that the result is still of limited interest to Enauta and that the quarter didn’t bring any news. He assesses, “With the delay in maintenance activities in Atlanta and operational redundancy with new wells, stabilization of production is expected and necessary.”