• 4 minutes England Running Out of Water?
  • 7 minutes Trump to Make Allies Pay More to Host US Bases
  • 10 minutes U.S. Shale Output may Start Dropping Next Year
  • 14 minutes Washington Eyes Crackdown On OPEC
  • 15 mins Tidal Power Closer to Commercialisation
  • 2 hours US-backed coup in Venezuela not so smooth
  • 7 hours Oil-sands recovery by solvents has started on a trial basis; first loads now shipped.
  • 45 mins Read: OPEC THREATENED TO KILL US SHALE
  • 7 hours New Rebate For EVs in Canada
  • 3 hours Solar to Become World's Largest Power Source by 2050
  • 15 hours Why U.S. Growers Are Betting The Farm On Soybeans Amid China Trade War
  • 22 hours Fisker Announces 'Mass Market' Electric SUV
  • 6 hours Oil stocks are heating up again! What's on your Watchlist?
  • 5 hours Boeing Faces Safety Questions After Second 737 Crash In Five Months
  • 10 hours Malaysia Oil & Gas Updates
  • 11 hours Biomass, Ethanol No Longer Green

Even With The Problems, Buying Petrobras Is A Trader’s Trade

Okay, I will freely admit that I’ve tried this before. To somebody trained to look for contrarian plays, bottom fishing for a stock like Petrobras (PBR) is just too tempting, despite all of the obvious problems.

In addition to oil’s decline, Petrobras has been hit by political chaos and scandal in Brazil and the resulting collapse in the Real. In addition, they created a problem for themselves by borrowing “cheap” dollars before the currency collapsed; debt that is now extremely expensive to service. I know all of this, but I was trained as a trader, so I cannot resist the chance to try one more time.

Despite all of the problems, you have to believe that the bankruptcy of the Brazilian state oil company is a virtual certainty to justify the current valuation, and I don’t, at least not imminently. If nothing else, that seems to be some way off, given that the current market capitalization of the company is about one third of the book value. The aforementioned dollar denominated debt makes that number somewhat misleading, as do continued ongoing losses, but there would seem to be enough room for survival to be more likely than failure. Add in the political will in Brazil to keep the nation’s flagship company afloat and the risk of bankruptcy diminishes considerably.

Given that the risk of total loss from buying the stock doesn’t look too bad, then bottom fishing can be justified, as long as two things are true. Firstly,…




Oilprice - The No. 1 Source for Oil & Energy News