Petrobras Declines to Seven-Year Low as BTG Reduces to Hold

Petroleo Brasileiro (PETR4), the state-run oil producer known as Petrobras, fell to a seven-year low after Grupo BTG Pactual (BBTG11) cut it to the equivalent of hold, saying an increase in gasoline prices was insufficient to bolster profit.

The stock declined 1.2 percent to 16.74 reais at the close of trading in Sao Paulo, the lowest price since November 2005. The shares sank 7.5 percent in the past five days amid the longest losing streak for the stock since October.

Rio de Janeiro-based Petrobras’s 6.6 percent increase to gasoline prices last month fell short of the 10 percent to 15 percent that BTG Pactual estimates the company needs to be able to bolster its balance sheet, analysts Gustavo Gattass and Luiz Felipe Carvalho said in a report. The price limits force Petrobras, which is controlled by the government, to pay more for the fuel it imports than it can sell it for.

“We fear that the small magnitude of the increase is a signal that Petrobras’s board does not share our sense of urgency with regards to the deterioration of the company’s balance sheet,” the analysts wrote in a note dated today. “This has made Petrobras a much more risky stock for the longer term than we’d like.”

BTG Pactual cut its rating on Petrobras from buy.

To contact the reporter on this story: Danielle Verbrigghe in New York at dverbrigghe@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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