Tuesday, January 11, 2011

An Oil Company Withe Growth Potential

Oil stocks have become a good place to invest again. Crude oil prices are rebounding globally and the economy is doing better. Oil typically thrives during periods of inflation and economic boom periods. Those days appear to be coming rapidly so now may be a good time to buy some oil

My favorite international oil play is Petrobras. . The stock looks cheap compared to its competitors. The stock has been beaten down since September when the company sold over 2 billion shares of common stock, and 1 billion shares of preferred stock.

Shares currently trade at 1.3 times book value and 1.8 times sales. The company is a cash cow. Petrobras has over $30 billion in cash on its balance sheet despite the fact that the company has been spending cash to fund its aggressive expansion plans. The company plans on spending $28 billion dollars in 2011 alone in oil and gas exploration. Revenue grew14% last quarter whereas earnings were lower than expected last quarter due to higher refining and production costs.

Petrobras owns some of the richest oil fields in the world which contain millions of barrels of crude oil in many resource rich regions throughout the world. Many of the major integrated oil companies are lining up to do business with Petrobras because of its many attractive properties..

Petrobras currently trades at slightly lower than 10 times earnings. This makes the stock cheaper than many of its U.S. and British competitors. The company pays a small dividend for investors looking for a small yield.

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2 comments:

  1. dividends4life doesnot in invest in this stock hence only when divdends4life invest in this stock is it safe to invest in this stock

    ReplyDelete
  2. With 30B in cash, it would be more prudent to find the companies Petrobras may be willing to buy. Hoarding cash is sometimes a bad idea for the stock price.

    ReplyDelete

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