Petrobras' Victory at the Supreme Court: What Does It Mean for the Company's Future?

Petrobras’ Victory at the Supreme Court: What Does It Mean for the Company’s Future?

Written by Paulo Nogueira

Published on 05/10/2020 at 15:23

Updated on 05/10/2020 at 15:29

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A Petrobras achieved an important victory at the STF regarding the continuation of its asset sales process. A negative ruling in the process would force the company to bear non-core activities for a longer period, causing the company to incur interest and further widening structural, economic, and financial differences compared to its global peers.

Following the approval, it is time for the company to continue with sales. In addition to the refineries, whose first two could yield the company a third of the upper bound of US$ 30 billion that it aims to raise with its investment plan by 2024, the company should continue making available to the market energy and gas generation assets, as well as part of its non-core exploration and production portfolio, such as onshore fields, post-salt, and shallow water.

It is valid to assess that, as seen in the sale of the refineries, it is possible that asset sales could again be legally contested in the future. For this reason, the STF’s decision last week gains more relevance, as it underpins a significant part of the company’s process and discourages future challenges. Furthermore, the movement that occurred consolidates the understanding of the highest spheres of the country regarding the importance of the action for unlocking value that the country desperately needs and for better utilizing these important productive tools in the hands of other players.

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Regarding Petrobras, we emphasize that the greatest risk involving its divestment process has been overcome. Despite the partial victory, the company cannot falter and must aim for the realization of its plan. A new round of proposals will be assessed for RELAM possibly still in October and, until then, the company should continue providing teasers to the market. We reaffirm our confidence in the company’s ability to monetize in this process and to efficiently allocate its resources in its new and leaner structure.

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