Petrobras was widely hated when I entered the position last December on Lula’s election. It’s still cheap, but with lower payouts and more money going into non core investments as per Prates comments today, there’s less of a reason to own it.
I have moved most of oil investment funds into lesser known GeoPark and Parex Resources, two Colombian producers which have a capital yield around 15% and are buying back 5-10% of shares annually plus paying a decent dividend.
The Petrobras thesis was simple - political risks were overblown, the stock was too cheap for the cash flow and yield. That remains true, but I would prefer to pivot to the names that have under performed at what may be an inflection point in market perception.
Petrobras was a six figure return for me.
Thanks for the heads up. Some questions:
1. Do you have targets in other countries apart from Columbia? (to lessen single country risk)
2. What's the all in-costs for GeoPark and Parex? If the Saudies would decide to ramp up production to gain market share from shale, what oil price levels would be dangerous for these producers?
i see dividend of 6-7% Since you mentioned 15%, trying to understand what am i missing?