Deutsche Bank Comments on Petrobras' (PBR) Q4 Results

Deutsche Bank maintained a Hold rating on Petrobras (NYSE: PBR) with a price target of $10. Petrobras stock was volatile Thursday after the company announced audited 3Q14 and 4Q14 results, including a massive write-down.

Commenting on developments, analyst Alexander Burgansky said, "The highlight was the write-down of BRL 50.5bn ($16.8bn or 8% of its fixed assets) related to the effect of the corruption probe ($2.1bn) and the impairment charge ($14.8bn), the latter as a result of poor planning, declining oil prices, unrealized refinery project goals and excess costs. The overall scale of the write-off is slightly above our $10-15bn expectation, but it is a non-cash amount and has no material impact on our future forecasts or valuation."

"Excluding the write-off, the underlying 4Q14 results (as reported) were ahead of our estimates (Figure 1), mostly as a result of higher than expected trading revenues and lower “other” costs, although part of the latter was moved back to 3Q14 when compared to previously released unaudited results. The combined 3Q & 4Q14 audited “clean” EBITDA was BRL 28.6bn, in line with our estimate. YE cash balance was $26bn, slightly ahead of the company’s guidance ($25bn)," continued the analyst.

Commenting on the company's operational outlook, Burgansky said, "During the press conference last night, Petrobras management announced the delay of 4 (out of 7 planned) FPSO’s in 2016, reducing its expected domestic oil production growth to just 2.7% in 2016 vs our current estimate of 10%. The company’s capex plans have been cut to $29bn in 2015 and $25bn in 2016, 9% and 22% below our current forecasts. While lower capex is positive, the savings won’t be sufficient to start deleveraging in 2016, particularly in light of reduced growth plans; hence we expect liquidity will tighten further. The management promised the update of 2015-19 business plan within 30 days."

For an analyst ratings summary and ratings history on Petrobras click here. For more ratings news on Petrobras click here.

Shares of Petrobras closed at $8.93 yesterday.

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