Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Petrobras: Cheap Energy Producer; Stock Could Resume Growth Trajectory In 2022

By Andy HechtStock MarketsNov 02, 2021 20:53
Petrobras: Cheap Energy Producer; Stock Could Resume Growth Trajectory In 2022
By Andy Hecht   |  Nov 02, 2021 20:53
Saved. See Saved Items.
This article has already been saved in your Saved Items

This article was written exclusively for

  • Crude oil taking the stairs higher
  • Next technical resistance level: over the $100 per barrel level
  • Petrobras: Brazilian energy producer
  • The shares have been under siege - Earnings have exceeded expectations, and the dividend is attractive
  • A 2022 election could cause a rally in PBR shares

Brazil is a leading commodity-producing country. The nation's climate and geology make the most populous country in South America a virtual supermarket to the world.

Brazil is the top producer of sugar, coffee, and oranges. The country's annual soybean crop is second only to the United States. Brazil produces many other raw materials as well, including energy.

Petroleo Brasileiro Petrobras (NYSE:PBR) is a diversified energy company. While PBR is currently a state-run enterprise, President Jair Bolsonaro is considering privatizing Petrobras.

Since the turn of this century, PBR shares traded from a low of $2.33 in 2002 to a high of $77.61 per share in 2008 when crude oil reached its all-time high. At the $10.20 level on Nov. 1, PBR shares were much closer to the lows than the highs, while crude oil has been moving higher. Still, PBR stock offers value and the company pays shareholders while they wait for capital appreciation, rewarding them with an attractive dividend yield.

Crude oil taking the stairs higher

Crude oil has been moving higher since reaching a record low on the nearby NYMEX futures contract in April 2020.

Crude Oil Weekly
Crude Oil Weekly

Source: CQG

As the weekly chart highlights, nearby crude oil futures rose from the all-time bottom at negative $40.32 per barrel in April 2020 to the commodity's most recent high at $85.41 during the final week of October. Crude oil appreciated by $125.73 per barrel.

Brent Daily
Brent Daily

Source: Barchart

Brent crude oil rose from a century low of $15.98 in April 2020 to its most recent high of $86.70 on Oct. 25, a $70.72 per barrel gain.

Next technical resistance level: over the $100 per barrel level

NYMEX crude oil broke above its critical technical resistance level over the past months.

Crude Oil Monthly
Crude Oil Monthly

Source: CQG

The monthly chart illustrates the move above the October 2018 $76.90 high. Technical resistance is now at the 2014 high at over the $100 per barrel level.

Brent Monthly
Brent Monthly

Source: CQG

The continuous Brent futures contract chart shows the price came within four cents of the October 2018, $86.74 high during October 2021 when it reached $86.70 per barrel. The 2018 high is a gateway to the $100 per barrel level for the Brent benchmark.

In March 2020, US daily crude oil production reached a record 13.1 million barrels per day. As the Biden administration addresses climate change with a strict regulatory environment for fossil fuels, US output has declined to 11.3 mbpd for the week ending on Oct. 22, 2021.

In 2021, the current administration canceled the Keystone XL pipeline project and ended fracking and drilling for oil and gas on federal lands in Alaska. As the US’s role in crude oil production worldwide declines, it once again becomes dependent on OPEC and Russia. Over the summer, the Biden administration asked the cartel to increase petroleum output. OPEC+ declined.

The bottom line is the pricing power is back in the cartel’s hands. Energy pricing decisions are now in the hands of Riyadh and Moscow. The cartel’s mission is to deliver the highest possible price for its members. After years of suffering from low prices as US shale production rose, for OPEC+ it’s payback time.

For consumers in the US and worldwide, there's no doubt they will be paying a lot more for oil and oil products. The cartel would much rather sell one barrel at $100 than two at $40 per barrel.

Petrobras: Brazilian energy producer

While the stricter regulatory landscape in the US and Europe and environmental advocates will not incentivize oil companies to expand output, existing producers are in a position to profit.

Petroleo Brasileiro Petrobras is Brazil's state-owned energy company. Petrobras is also a world-leading energy producer. The company’s profile states:

Petrobras company profile
Petrobras company profile


PBR is a multinational energy company with room to run after years of selling on the back of political turmoil in Brazil. At $10.20 per share on Nov. 1, PBR had a $64.047 billion market cap. PBR trades an average of over 33.1 million shares each day.

Shares have been under siege but earnings exceeded expectations; dividend is attractive

PBR pays an annual dividend of $1.00 per share for a significantly above-market 10.18% yield. As well, over the past four quarters, PBR has exceeded analysts’ consensus earnings forecasts.

Source: Yahoo Finance

The new oil price highs in late October mean the streak of beats for PBR could continue in future quarters. For Q3 the company beat on EPS as the company earned more than 49 cents per share forecast, but missed on revenue.

In addition, a survey of thirteen analysts polled by project an average price target of $13.28 per share, a 30.18% upside above the closing level on Oct. 29. The range of forecasts is from $10.80 to $16 per share.

PBR Daily
PBR Daily

Source: Barchart

The chart above shows that technical resistance for PBR shares stands at around the $17-$18 level. The all-time high came in 2008 when crude oil reached its record high. PBR shares peaked at $77.61 in May 2008.

Brazil's 2022 election could spur a rally in PBR shares

President Bolsonaro is not a popular figure in Brazil. The Brazilian Senate recently accused the leader of crimes against humanity, blaming him for the nation’s position as second globally in COVID-19 deaths.

Recently, he replaced PBR’s CEO, sending the shares lower. With the next Brazilian Presidential election in 2022, Bolsonaro has said that he will either serve another term, be jailed, or wind up dead. Brazil is a political and economic nightmare, but PBR shares are at a level that makes them a bargain in the oil market. The country's President recently said that privatization of PBR would be an “ideal” move given the current high fuel prices.

A new administration could turbocharge gains for the profitable company. The very rich dividend provides plenty of income for investors waiting for capital appreciation.

I am a scale-down buyer of PBR shares as it offers one of the most attractive valuations of worldwide integrated energy companies. Risk-reward favors the upside as the price of oil continues to climb.

Petrobras: Cheap Energy Producer; Stock Could Resume Growth Trajectory In 2022

Related Articles

Petrobras: Cheap Energy Producer; Stock Could Resume Growth Trajectory In 2022

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email