Strategic and Financial Analysis of Petrobras

Exequiel Martinez Taylor

Student thesis: Master thesis


The objective of the thesis Strategic and financial analysis of Petrobras is to examine how an external investor can access whether the current market value of Petrobras reflects the real company’s potential to create long-term value for its stakeholders. The reason for the study relies on the challenging oil and gas industry and the recent dramatic events inside Brazil related to political instability, corruption and recession.
Based on the nature of the thesis both a qualitative and quantitative research approach has been selected. This approach, along with the selected sources, creates the fundament for the analysis. The sources consist of both internal (i.e. customer data, annual reports, budgets, business plans, website.) and external data (i.e. expert assessments, articles from newspapers, reports, previous studies of the issue).
In order to analyze the collected data, different analytic frameworks have been created. The first framework consists of three models: PESTEL, Porter’s Five Forces and Porter’s Value Chain and is used to analyse the non-financial value drivers. In the second part of the analysis a selection of important value drivers is projected on the basis of historical financial performance and future expectations. Lastly the DCF model is applied to value the share price of the company.
The analysis has shown that both non-financial value drivers and historical financial parameters play a role in the valuation of Petrobras’ stock. Some of the key factors for the non-financial value drivers are found within the role of governments, the advantages of the right expertise and technology, green policies, the Brazilian recession and the OECD recovery. In the case of the historical financial parameters results have shown that Petrobras has outperformed the peer group in terms of EBITDA margin and short-term liquidity, but performed poorly considering long-term leverage and return on equity. The DCF model indicated that the stock of Petrobras was undervalued by the end of 2015, while the sensitivity check indicated the impact in the share price from changes in input assumptions. In addition, a multiples approach confirmed that the company could perform at the industry levels based on future expectations.
Overall, the thesis shows how a full valuation conducted by an external analyst can be completed by using the models and method presented. However, one should be aware that the results would always be sensitive to the input applied.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2017
Number of pages92
SupervisorsSvend Peter Malmkjær