Boston, MA 10/29/2013 (wallstreetpr) – Despite a significant 39% drop in net third-quarter profits, ADR prices of Brazil’s state-owned petroleum and natural gas company Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) shot up 9%, riding on a strong three-month overall rise of 23%. Brazil’s largest oil company Petroleo Brasileiro (Petrobras) registered receding net profit margins of $1.56 billion for the third quarter from its $2.74 billion net profit margins for the same quarter of FY2012. Petrobras’s net operating revenues also declined to $33.95 billion from $36.37 billion in 2012. The revenue decline is largely attributed to stagnant production, huge exploration costs which skyrocketed by about 70% and steadily rising domestic fuel demand due to surging automobile sales which drove up oil imports at higher prices. But the Brazilian government, which owns 47% stake in Petrobras, kept the domestic oil prices below import costs for fear of stoking inflation, cutting into its profits.
The oil major is currently working on a new pricing mechanism for gasoline and diesel to curb the recently incurred huge losses on sales, which have raised questions about the oil and natural gas major’s credibility to implement a huge investment program. Experts, meanwhile, remain upbeat on Petrobras prospects and have set a $25 price target for its American Depository Receipt (ADR), with a $15.91 closing price, implying a resurgent 57% if its price target is hit. They expect the market to see beyond the weak results and focus on the possibility of price parity, which could enhance the earnings profile for Petrobras, ushering in a strong degree of outperformance. This is because Petrobras still ranks high on analyst expectations to outperform the broader U.S. equity markets over the next two quarters.
Petrobras shares rose 9.05% on October 28 trading to $17.35 from its previous $15.91 close on NASDAQ. After-hours trading saw a mostly rising graph, registering an all-time after-hours high of $17.45.