By Brazil Stock Guide – XP has lowered its Brent forecast to $65 a barrel from $70 but is keeping its buy ratings on Brazil’s three leading independent oil producers — PRIO (B3: PRIO3), Brava (B3: BRAV3) and PetroReconcavo (B3: RECV3). The brokerage said the sector’s strong cash generation continues to stand out, even as oil prices slip back to mid-2023 levels. Projected free cash flow to equity yields remain high at 35% for PRIO, 28% for Brava and 20% for PetroReconcavo in 2027. “Free cash flow speaks louder than short-term noise,” analysts Régis Cardoso and João Rodrigues wrote.
Oil prices have fallen to around $65 a barrel in October amid worries about oversupply and fresh OPEC+ quota adjustments. XP said the move reflects a cyclical normalization rather than the start of a structural downturn. “We share some of the market’s concerns but don’t see a prolonged bear cycle,” the report said, adding that it expects Brent to hover between $65 and $70 and that Brazilian independents are well positioned to navigate a period of softer prices. “Even at $65 Brent, cash generation remains impressive — and that’s what sustains our buy calls,” the brokerage noted.
The firm cut its 2026 year-end target prices to reflect the weaker oil scenario: R$60 for PRIO, down from R$66; R$20 for Brava, down from R$27; and R$15 for PetroReconcavo, down from R$22. Petrobras (B3: PETR4) was also trimmed to R$37 from R$47. Still, XP keeps the sector among its top picks, arguing that Brazil remains one of the most cost-efficient and execution-strong markets for junior E&Ps globally. “The margin of safety has narrowed, but the investment case is intact,” the analysts said.
The main risk, according to XP, is a deeper decline in Brent below $65 a barrel. Company-specific factors include the start-up of Wahoo for PRIO, decline-rate stabilization at Atlanta for Brava, and capital-expenditure discipline at PetroReconcavo.
For the third quarter of 2025, XP expects a mixed but improving performance. PRIO should rebound after a weak second quarter, with sales volumes rising even as production fell. Output dropped 12% quarter-on-quarter to 88,000 barrels per day due to a temporary ANP shutdown at Peregrino, but sales increased 8% to 8.8 million barrels thanks to inventory drawdowns. XP forecasts revenue of $554 million, up 16%, EBITDA of $345 million, up 25%, and net income of $93 million. The start of production at Wahoo, scheduled for March or April 2026, remains the key catalyst for the stock.
Brava is set to extend its turnaround, sustaining positive free cash flow as production in the Atlanta field continues to climb. XP expects total output of 91,800 barrels of oil equivalent per day, up 7%, driven by a 30% increase in gas and a 2.4% rise in oil. Revenue should edge down 2% to R$3.1 billion on currency effects and inventory buildup, while EBITDA should reach R$1.3 billion and net income R$102 million. Free cash flow to equity is estimated at R$260 million, or about a 4% yield. “Brava has become a story of consistency rather than promise,” XP said.
At PetroReconcavo, the tone remains cautious. Production likely fell 3% to 26,400 barrels of oil equivalent per day, leading to lower revenue of R$756 million, EBITDA of R$354 million, and net profit of R$178 million, down 25% from the prior quarter. Free cash flow should stay negative for a second consecutive period due to heavy investment, though the trajectory is improving. “Mature assets continue to deliver competitive risk-adjusted returns even in a lower-Brent environment,” the note said.
XP concludes that while valuation headroom has narrowed, Brazil’s independents remain among the most resilient global oil stories. “These companies have learned to thrive with Brent at $65 — not depend on $90,” the report said.