Petroleo Brasileiro Petrobras SA (ADR) (PBR), Centrais Eletricas Brasileiras SA (ADR) (EBR): This Brazilian Energy Play Is Still Looking Good

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR)’ shares have been down 18% in the last six months but the company has been making some good progress, particularly related to partnerships with foreign firms. I believe that it is not a ‘sell’ but a close to a ‘buy’ at the moment. Although I am skeptical about Petrobras’ future targets, the company is moving in the right direction. The current drop in its shares has only made it more attractive and now it offers a juicy dividend yield of 4.2%. Its recent ventures include its partnership with South Korea’s GS Holdings to develop a refinery in Brazil. A similar agreement with China’s Sinopec is also on the cards.

Moreover, some positive news has also come from its upstream operations. Petrobras has started production at its Offshore Lula Nordeste Field, which will produce 13,000 barrels of oil per day. This is the third plant which started operations this year. As far as downstream operation goes, the price increase will also help Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) to offset some of the negatives in this loss-making operation. In essence, the company is putting its house in order and even if it fails to meet its spending targets, Petrobras could still emerge as a much better Brazil-focused energy company.

Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool recommends Petroleo Brasileiro S.A. (ADR).

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