Petrobras Maintains Capital Discipline With Latest Strategic Plan, but Political Uncertainty Remains

Petrobras announced its 2023-27 strategic plan that included an increase in spending to prepandemic levels but largely held the line on the capital discipline that has been the centerpiece of its recent turnaround. However, the ultimate implementation of the plan for its full duration remains in question given the recent election of Luiz Inácio Lula da Silva, who has signaled he’d like to make changes to Petrobras' capital plans and operations—to what extent, however, remains unknown. Until that outcome is known, we will view any management plans skeptically despite thinking them sound. Meanwhile, investors might continue to steer clear of Petrobras despite its financial improvement and large payouts. Our fair value estimate and moat rating, which already incorporated higher spending and lower downstream profitability, remain unchanged.