PPeet­tr­roob­br­raass ppoou­un­nd­deedd aafft­teerr RRoou­usssse­effff wwi­inn iinn BBrraazziill

Financial Mirror (Cyprus) - - FRONT PAGE -

Petroleo Brasileiro S.A. (NYSE: PBR) is get­ting to demon­strate all over again just how bad it is when a na­tion is un­der a so­cial­ist regime.

The oil gi­ant Petro­bras saw its Amer­i­can de­posi­tary shares (ADSs) in New York pounded on Mon­day morn­ing on news that Dilma Rouss­eff was re-elected in Brazil.

It is im­por­tant to note how much the Petro­bras shares were treated as a par­a­bolic barom­e­ter of how the elec­tion polls were look­ing. Now it turns out that Den­nis Gart­man’s pre­dic­tion was cor­rect: Rouss­eff’s op­po­nent had no chance of vic­tory. That be­ing said, her vic­tory ap­pears to be by a mar­gin of only 51.6% to 48.4% over the cen­tre-right can­di­date Ae­cio Neves.

As far as why Petro­bras is such an ex­treme barom­e­ter, it is a state-run oil company in which profit and growth take a back­seat to the coun­try’s pop­u­la­tion. Petro­bras has its terms dic­tated to it: it has to pay to drill the oil and does not de­cide what it can sell the oil and fin­ished prod­ucts for.

Sadly, Petro­bras could be one of the great­est oil com­pa­nies in the world. It has vast re­serves, and it has yet to re­ally cap­i­talise by be­ing a big in­ter­na­tional oil sup­plier on the world mar­kets. Its state-run sta­tus keeps it in the dirt.

Petro­bras shares had al­ready sold off around 40% from the highs of Septem­ber, based on the ex­pec­ta­tion that Rouss­eff would win in her re­elec­tion bid. New York’s ADSs were up over 6% at $12.93 on Fri­day, but Mon­day’s trad­ing in­di­ca­tions had Petro­bras shares down more than 16% at $10.83. Keep in mind that the 52-week low of $10.20 was back in March, so a run to above $20 has ef­fec­tively all been wiped out. The pre­ferred shares of Petro­bras trade as PBR-A, and they were down 16% at $11.27, against a 52-week range of $10.66 to $22.14.

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