Shares of leading Brazilian National Oil Company (NOC) Petroleo Brasileiro SA aka Petrobras (NYSE: PBR) lost R$30 (~US$5.6) billion in market value on Wednesday after the country’s lower house of Congress voted late on Tuesday to make it easier for politicians to take roles at state-run firms.
The preferred shares of the oil and gas giant dropped 7.9% on Tuesday’s session, while the common shares fared even worse after losing 9.8% on the day. The company has now lost a staggering $41 billion since October 21 with the selloff triggered after President Jair Bolsonaro appeared to be stalling in voter polls ahead of the country’s runoff election. Bolsonaro would go on to become the first sitting president in Brazil to lose a re-election bid.
Petrobras has been at the center of a major corruption scandal over the past decade, due in large part to political appointments in its senior management. The selloff comes at a time when Petrobras was regaining its footing.
Last week, the oil and gas supermajor announced that it will increase 2023-2027 investments by about 15% to $78 billion over the company’s 2022-2026 projected spending. Of the $78 billion planned for capex, 83% or $64 billion is earmarked for E&P activities while 67% of the E&P capex budget will go to pre-salt activities. The company also plans to boost spending to reduce carbon emissions to ~6% of the total compared with 4% in the previous plan, and will see its decarbonization fund more than double the current $248M.
President-elect Luiz Inácio Lula da Silva has stated his desire for Petrobras to expand its refining capacity and invest more in areas such as biofuels and renewable power. Petrobras' share in Brazil's oil and gas production fell to 65% in October, the lowest level in at least a year, thanks in large part to the divestment of several mature onshore and offshore fields in recent years.
By Alex Kimani for Oilprice.com
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