Petrobras intends to continue improving its debt profile

Petrobras (BB- / Ba2 / BB-) posted strong 1Q21 results. We believe the company has sent the right signal to investors by focusing on the continuity of its current business plan, including fuel pricing policies, a non-core divestiture program and debt reduction. We note, however, that the sale of refineries is progressing slowly, which we believe was expected given the recent abrupt change of CEO and the government's threat to intervene in the company's pricing policy for key products. In addition, while we welcome the fact that the pricing policy remains unchanged, we emphasize that the government continues to openly declare its dissatisfaction with this process. Thus, we do not exclude the possibility of making some adjustments to the company's strategy.

Finally, in terms of debt reduction, the company continues to overfulfill its strategy and is likely to meet its 2022 target ahead of schedule. Thus, we estimate that the company may still place about $ 1.7bn in bonds this year, which will provide technical support for the issuer's yield curve. Among the issuer's securities, we highlight the dollar issue of Petrobras Eurobonds maturing in January 2030 (USN6945AAL19). The shares are traded at a yield of 3.8%. The duration of the issue is 7 years.

Petroleo Brasileiro (Petrobras) operates and produces the majority of Brazil's oil and gas. Petrobras has proved oil and gas reserves, and produced average daily production of more than 2 million barrels of oil equivalent. In Brazil, it operates nearly 15 refineries and an extensive oil and gas pipeline network. Other units operate electricity (approximately 20 thermal power plants), petrochemicals, and natural gas assets. Petrobras is controlled by the Brazilian government and generates majority of sales in its home country.