Petroleo Brasilerio (NYSE:PBR) is about to release earnings. Ponder this Bear Case Scenario:
PBR is controlled by the government. Economic decisions will be shaped to benefit the politicians as framed by the issues du jour. Long term economics that benefit shareholder wealth creation will be far in the rear view mirror. Governments are not good businessmen.
The government is unwilling to revise refinery prices. Voter consumers win for now. Capex in refineries will suffer soon.
Despite impressive resources in the ground Petroleo Brasilerio is unable to effectively exploit new finds and cannot properly manage existing fields which are declining well before their economic time.
George Gutowski writes from a caveat emptor perspective.