By Brazil Stock Guide – Petrobras (B3: PETR4) is likely to deliver smaller dividends in the fourth quarter of 2025 than investors currently expect, as higher capital spending and one-off cash outflows squeeze free cash flow at year-end. While market consensus points to roughly $1.7 billion in quarterly dividends, BTG Pactual estimates payouts closer to $1.3 billion, implying a quarterly dividend yield of about 1.4% and potential downside to prevailing assumptions.
The bank forecasts Petrobras’ 4Q25 EBITDA in a range between $10.5 billion and $11.5 billion, supported by stable production of around 2.5 million barrels per day and resilient refining margins, despite an 8% quarter-on-quarter drop in Brent prices. Refining and marketing EBITDA is expected to remain robust due to strong crack spreads and volumes, partially offsetting weaker upstream pricing dynamics.
Capital expenditure, however, remains the key swing factor. Petrobras has guided for 2025 capex of $18.5 billion, plus or minus 10%, but BTG believes spending could reach the upper end of that range if investments in upstream projects — particularly Búzios — are accelerated. As a result, cash capex in the fourth quarter alone could land between $5.2 billion and $5.8 billion, directly reducing the amount available for shareholder distributions under the company’s dividend formula.
Additional pressure comes from non-recurring cash items, including payments related to the PPSA pre-salt auction and the Jubarte Production Individualization Agreement. Factoring in these items, BTG estimates free cash flow of about $2.8 billion for the quarter, reinforcing its view that dividends are more likely to fall in a $1.2 billion to $1.5 billion range rather than match consensus forecasts.
With limited visibility on Brazil’s macro-political outlook and an uninspiring projected free cash flow yield for 2026, the bank maintained a Neutral rating on the stock, arguing that prospects for a near-term valuation re-rating remain capped.