CNBC Talking Head on Petrobras

Updates

August 6, 2012: Petrobras plunges; breaks 13-year streak of increasing profits.

June 15, 2012: How coincidental. Yesterday I posted the story below. This morning, page C10 of the WSJ: "Tomorrow Never Dies for Petrobras Investors."

I haven't read the story yet, but the headline suggests where it is going. So, notes while I read it for the first time; let's see how it compares to my post yesterday.

"Despite huge strides, Brazil still has an image of always being the country of tomorrow. Its national oil company, Petroleo Brasileiro, increasingly suffers in the same way."

Data points (some numbers rounded):

• new investment plan confirms a worrying trend
• plans to increase CAPEX by 5% between 2012 and 2016
• projected output in 2020 has been cut 11% to 6 million bopd
• the company carries the extra baggage that comes with being a state-controlled national champion
• the government may see PBR as a countercyclical investment; if so, investors will be waiting a long time for good news

Original Post

Talking head on CNBC on Petrobas. Share price down 45% this past year.

This is actually a great story ("great" -- in terms of many story lines; many lessons to be learned; much to talk about; not great as an investment story).

The CNBC talking head suggested that the drop in Petrobras is related to what is going on in Europe. In fact, the share price of Petrobras started falling well before the worst news was coming out of Europe.

I think he completely missed the story.

I bought shares in Petrobras a long time ago; maybe two years ago, I forget when. But I quickly got out when it was clear the Brazilian environmentalists would be calling the shots, and when it became clear that .... well, let me do it this way, three bullets

• Brazilian environmentalists will be calling the shots going forward
• it turns out that it will become more expensive to drill off-shore Brazil than originally expected
• the price of oil has fallen significantly; a global recession could prolong the pain

The off-shore Brazilian spill was the canary in the mine for me. Based on the government's reaction to this relatively small spill -- and in fact, may not be a spill so much as natural leakage (although I haven't followed the story in some time) -- I knew the Brazilian government was not going to let anything happen to their pristine sandy beaches (that I remember so well from a USAF trip to the area many years ago) before they host the summer Olympic games (2016).

Those are the reasons for the fall in share price of Petrobras; global events play a role, but there unique issues facing Petrobras. 

Disclaimer: this is not an investment site. This is not a recommendation to sell or buy shares in Petrobras -- I don't even recall the ticker symbol at the moment (PBR -- thank you). This is just idle chatter among friends.

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A Note for the Granddaughters

Updates

Later, 12:30 p.m.: How interesting. I posted the original note below about 11:00 a.m. this morning. I just got back from picking up the granddaughters, and checked in on CNBC. After the break they will be doing a story on a rare blue lobster caught off Nova Scotia. Some weeks ago, the granddaughters and I saw three blue lobsters at the Boston Aquarium including one that weighed 16 pounds (?).  The blue lobster is rare, but it's not new.

Original Post 

I was not going to post another story for the granddaughters today but I got several requests to post more (comments not posted). 

This is their last day of school for the school year. I will be leaving in a few minutes to pick them up. I will be off-line then.

I had hoped to take them whale watching today, but the weather is not cooperating. But then I was reminded: they have swimming lessons out at Hanscome AFB this afternoon. So, everything worked out perfectly. (Actually cooler, rainy weather might be a boon: fewer people on the boat and if dressed appropriately not a problem. In fact, it provides the grandchildren a better sense of what the ocean can be like. But I digress.)

The weather is supposed to be a lot nicer tomorrow. There are several options for whale watching out of Boston Harbor. Boston Aquarium members probably get the best deal: $38 for adults and $28 for children. The "going price" for walk-up in general is about $45/$35.

Up in Provincetown, at the tip of Cape Cod, we were told that this is one of the best years for whale watching due to generally warmer weather, as in global warming.