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Petrobras (PBR) Stock Rises on Revised Regulatory Verdict

Brazilian state-run integrated energy company Petróleo Brasileiro S.A. or Petrobras PBR saw its shares jump 4.9% to $8.44 yesterday on heavy trading volume following certain positive announcements.

What’s Behind the Rise?

Brazil's securities industry watchdog CVM has overturned its preliminary verdict on Petrobras per which it was asked to reiterate its financial statements from the second and third quarters of 2013 to 2016. Banco Bradesco SA, the underwriter of Petrobras' 2010 offerings, was also relieved by the industry watchdog.

On the other hand, former Brazilian President Luiz Inacio Lula da Silva was charged with corruption and sentenced to an imprisonment term of nearly 10 years. Petrobras’ involvement in the multibillion dollar money laundering and bribery case along with years of mismanagement and low oil prices turned it into the world's most indebted oil company. Petrobras currently has a net debt of $94,993 million.

The state-run oil major stated that its board members have approved an initial public offering of shares of its fully-owned subsidiary Petrobras Distribuidora S.A. ("BR") on the Sao Paulo stock exchange, to decrease its debt and investment in low-return activities. The initial offering will be accomplished through a follow-on public offering. Petrobras expects the listing to be on the Novo Mercado segment, where corporate governance standards are high. This move will provide the company enough resources to concentrate on a trimmed portfolio.

About the Company

Petrobras is the largest Latin American oil and gas integrated company. It is involved in the exploration, production, refining, retailing and transportation of petroleum and its byproducts, both domestically and internationally. The company, headquartered in Rio de Janeiro, dominates Brazil’s oil and gas sector. It produces most of Brazil’s crude oil and natural gas and accounts for almost the entire refining capacity of the country.

Price Performance

Petrobras outperformed the Zacks categorized Emerging Markets Integrated industry. Its shares have declined 8.9% over the last three months while the broader sector witnessed a decrease of 14.5%.

Zacks Rank and Stocks to Consider

Petrobras presently has a Zacks Rank #2 (Buy).

Some top-ranked stocks in the oil and energy sector include Delek US Holdings, Inc. DK, Crescent Point Energy Corporation CPG and Canadian Natural Resources Limited CNQ. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek US Holdings’ sales for 2017 are expected to increase 71.3% year over year. The company delivered an average positive earnings surprise of 60.7% in the last four quarters.

Crescent Point’s sales for the second quarter of 2017 are expected to increase 20.2% year over year. The partnership delivered an average positive earnings surprise of 354.9% in the last four quarters.

Canadian Natural Resources’ sales for 2017 are expected to increase 49.4% year over year. The company delivered a positive earnings surprise of 30.8% in the first quarter of 2017.

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