Boston, MA 07/03/2014 (wallstreetpr) – Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) made an important announcement this week that should come as good news for shareholders. The company’s CEO said she don’t expect to issue new shares that would have a dilutive impact on the stock before 2030. The company has 2030 as the end horizon of its long-term business plan.
The company is presently struggling to regain its footing amid poor prices in the domestic market, high exploration costs and high costs of commodity imports. Nonetheless, the company maintains that its future is bright if it can meet its production targets set for 2020.
The announcement that Petroleo Brasileiro (NYSE:PBR) will not dilute its shares anytime soon comes at a time when the company also announced a deal with the company that is likely to increase its previously declared investment budget.
Direct Deal
The world’s most indebted oil company recently landed a direct deal from the Brazilian. However, the development has been soaked in concerns although in the face value it is expected to boost the company’s production target.
Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) will add another 10 – 15 billion barrels of offshore oil reserves through the latest deal with the government of Dilma Rousseff who is seeking reelection.
The company targets to hit production target of 4.2 million barrels per day by 2020.
Political Meddling
Most challenges facing Petroleo Brasileiro (NYSE:PBR) can be traced to government meddling in the company’s operations. As such, the move by the government to award the company a direct deal while bypassing an auction process has succeeded in raising more concerns that the government influence in the company is getting deeper, which is not good for private investors.
As a matter of fact, the surprise deal with the company has seen analysts moving to downgrade the stock of Petroleo Brasileiro, citing lack of clarity in the transaction. Bruno Montanari, an analyst at Morgan Stanley (NYSE:MS), lowered his view on the stock of Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) to a “Hold.”
