News: Shares of Brazil’s Petrobras plunge after CEO ouster.
RIO DE JANEIRO (Reuters) – Petrobras stock fell 21% on Monday, wiping out its 70 billion reais ($ 12.69 billion) market value as analysts upgraded their ratings in response to Brazilian President Jair Bolsonaro’s move To replace the market of the state-controlled oil company lowered -friendly executive director with a retired army general.
The sell-off intensified after the far-right Brazilian leader, who announced the move to Petrobras on Friday, said the company’s fuel policy was only encouraging to financial markets and select groups in Brazil and should be part of efforts to cut gasoline and fuel consumption Diesel prices will be changed.
Analysts from Credit Suisse, Santander, Scotiabank, Bank of America, Bradesco and XP were among those who downgraded their recommendations on shares in Petroleo Brasileiro SA, as the Rio de Janeiro-based maker is known.
“A good reputation is difficult to earn and easy to lose,” said BTG bank analyst Thiago Duarte in a message to customers.
Petrobras’ “all-important” pricing policy and its impact on cash generation and planned asset sales, especially refineries, have tarnished debt deleveraging and dividend prospects, Christian Audi-led Santander analysts said in a statement to customers after downgrading their recommendation for the stock to “hold” from “buy”.
“While we believe that the company’s upstream capabilities, led by its world-class pre-salting facilities, will remain, uncertainty has increased,” said Santander.
XP analysts said investing in Petrobras was no longer tenable after Bolsonaro’s sudden decision to replace CEO Roberto Castello Branco. “There is a risk to the company’s independence and its ability to continue to value its fuel according to international parity.”
Dollar-denominated debt issued by Petrobras also suffered significant losses as the bond fell 7.6 cents in 2043 to trade at a seven-month low of 98 cents against the dollar, refinitive data showed.
Bolsonaro announced the nomination of Joaquim Silva e Luna to replace Branco over a Facebook Post after close of trading on Friday.
The retired general said in an interview with Radio Bandeirantes on Monday that he had not spoken about it and had no opinion on a possible privatization of the company.
On Saturday, Silva e Luna told Reuters that the company needed to find a “balance” in fuel prices given the impact it will have on shareholders, investors, sellers and consumers.
Brazilian securities industry watchdog CVM is expected to open an investigation on Monday, according to a source known to the matter.
($ 1 = 5.5180 reais)
Reporting by Sabrina Valle and Paula Laier, additional reporting by Aluisio Alves and Tatiana Bautzer in Sao Paulo; Karin Strohecker in London, editing by Louise Heavens, Jason Neely and Paul Simao
Original Source © Reuters