Page 5 - LatAmOil Week 47 2022

LatAmOil COMMENTARY LatAmOil

The analyst went on to urge Luiz Inacio Lula “This new administration has openly criti-
da Silva – Brazil’s newly elected president, who cised how Petrobras has been run and has also
is due to be inaugurated on January 1, 2023, discussed likely changes at the company ... The
replacing incumbent Jair Bolsonaro – to display main ones should be on capital allocation and
more clarity about his future energy policies. pricing policy for fuels sold domestically,” he
“On fuel prices, there is no definition of the commented.
company’s new pricing policy, and we expect
refining margin compression,” he wrote. “We Request to suspend privatisation
also think a key risk lies in higher investments Planning for the shift may already be underway.
as, in the past, Petrobras was unable to diver- Mauricio Tolmasquim, a professor at the Federal
sify from non-core integrated oil profitability, a University of Rio de Janeiro who has been asked
trend that could potentially return.” to serve on the mining and energy group of
Carvalho’s remarks accompanied a sea Lula’s political transition team, said on Novem-
change in UBS’ stance on Petrobras stock. The ber 22 that the Bolsonaro administration had
investment bank had been recommending that been asked to suspend Petrobras’ privatisation
market participants buy shares in the state- programme for the time being.
owned company, but now it is rating the NOC Tolmasquim – who is also CEO of Empresa Lula’s transition
as a sell. It has also reduced its valuation on de Pesquisa Energética, an affiliate of Bra-
Petrobras stock by more than 50%, from BRL47 zil’s Ministry of Mines and Energy (MME) team has asked
($8.77) per share to BRL22 ($4.11) per share. – explained this request by saying that the tran-
Its advice seems to have struck a chord sition team had suggested that the NOC’s asset the Bolsonaro
among investors. As of November 22, several sales be put on hold until a new chief of MME
market sources were reporting Petrobras’ stock could be appointed. He did not name any likely administration
prices down, though there was no consensus candidates or say whether Lula still believed, to put Petrobras’
about the exact extent of the decline. Some as he has stated before, that Petrobras should
observers put the fall at up to 18%, while oth- not sell off oil refineries or certain other assets. asset sales
ers offered much lower numbers. All sources (Under Bolsonaro, the NOC has been focusing
appear to agree, though, that UBS’ volte-face led on upstream projects, especially the exploration
to a price drop of at least 4% in the first day of and development of large offshore sites in the
trading this week. pre-salt zone, and divesting non-core assets.)
Meanwhile, another member of Lula’s transi-
Part of a pattern tion team – Jean Paul Prates, who represents Rio
Part of the problem for Petrobras is that this Grande do Norte State in Brazil’s Senate – said
price drop did not occur in isolation. Instead, on November 22 that the president-elect was
it is coming on the heels of several weeks of likely to make an announcement on his choice
decline. “Based on anecdote, investors are not of candidate for Petrobras’ next CEO by early
playing a wait-and-see game with Petrobras, December. (Prates, who has experience in the
as the stock has shed around 30% of its market oil industry, has been mentioned as a possible
value in the past month,” GuruFocus.com noted candidate for the post.)
on November 22. Neither member of the transition team com-
Moreover, UBS is not the only market mented on reports that Bolsonaro had filed a
observer to express concern about the possibility challenge to the results of the run-off election
that Lula, a leftist with a populist streak, will see held on October 30, citing claims of irregulari-
Petrobras as a resource and a policy tool that can ties and malfunctions in some electronic voting
and should be used in a manner quite different machines. As of press time, the legal challenge
from that of his predecessor. Rodolfo Angele, an was not expected to make much headway,
analyst for JPMorgan, wrote in a recent note that though it has sparked some political controversy
he expected to see major shifts at the NOC. and demonstrations. ™

Lula’s election victory has altered investors’ outlook, according to UBS and other observers (Image: Lula.com.br)

Week 47 23•November•2022 www. NEWSBASE .com P5