By Brazil Stock Guide – Petrobras (PETR4; PBR) had its price target raised by XP Inc., which maintained a buy recommendation and cited improved market conditions alongside adjustments to its valuation model. The brokerage lifted its target to R$47 per share, equivalent to $17.4 per ADR, implying roughly 23% upside from current levels.
The outlook was detailed in an XP report previewing Petrobras’ fourth-quarter 2025 results, scheduled for release on Wednesday (5). The firm expects sequentially weaker operating performance, largely reflecting lower Brent crude prices during the period.
XP projects fourth-quarter EBITDA at $11.1 billion, down 7.1% quarter-on-quarter, as Brent averaged $63 per barrel, a 7.4% decline from $68 in the third quarter. The brokerage’s model indicates a potential EBITDA range between $9.9 billion and $12.6 billion. Net income is forecast at $2.4 billion.
Free cash flow to equity is estimated at $649 million, implying a quarterly yield of about 0.6%. XP expects ordinary dividends of roughly $1.6 billion, equivalent to a 1.6% quarterly yield — substantially below recurring levels — reflecting higher investments and one-off cash outflows. These include $1.3 billion related to the auction of non-contracted areas and $258 million tied to the Jubarte unitization agreement.
Petrobras shares have gained 24% year-to-date, while ADRs are up 33% in dollar terms. The move mirrors broader strength in Brazilian equities. The benchmark Ibovespa has risen 18% over the same period, while Vale (VALE3; VALE) has climbed 24%. According to XP, foreign capital inflows into emerging markets, including Brazil, have supported the rally.
Brent prices have rebounded from lows near $60 per barrel earlier in the year to around $70 at the time of the report, reinforcing sentiment toward oil producers and raising the prospect of short-term earnings revisions.
XP said the upward revision in its price target reflects a lower equity risk premium embedded in its discount rate, now set at 13.7% in U.S. dollars. At the revised valuation, the implied target free cash flow to equity yield stands near 6%, reaching about 8% in 2026 and 2027.
For the fourth quarter, Petrobras reported oil production of 2.5 million barrels per day on Tuesday (10), down 16,000 barrels per day, or 0.6%, from the prior quarter. Pre-salt output totaled 2.1 million barrels per day, broadly stable sequentially, as maintenance stoppages were partially offset by higher output from FPSO Alexandre de Gusmão and capacity increases at FPSOs Almirante Tamandaré and Marechal Duque de Caxias.
Post-salt production declined by 11,000 barrels per day to 355,000 barrels per day, accounting for most of the consolidated drop. Refinery utilization fell to 89%, down five percentage points quarter-on-quarter.
XP flagged risks to its recommendation, including broader equity market risk aversion, potentially lower oil prices due to easing geopolitical tensions or supply-demand imbalances, and continued cash outflows that could weigh on shareholder returns.