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In a significant development,Petróleo Brasileiro S.A. - Petrobras PBR is nearing a deal with Unigel to resume management of two crucial fertilizer plants located in the northeast part of Brazil. These facilities were leased to Unigel in 2019 as part of Petrobras’ divestment strategy.
Under the proposed deal, PBR will manage the plants and Unigel will be hired to operate and maintain them for five years.
Although Unigel has agreed the deal, the company's management is awaiting a report from the PBR's working group on fertilizers before approving it.
An Insight Into the Key Fertilizer Plants
The two key fertilizer plants were leased to Unigel in 2019 as part of PBR’s divestment strategy. However, high natural gas prices rendered the plants unprofitable, leading to the plants being nonoperational in 2023.
In 2023, Brazil’s president wanted to revive operations at both plants to reduce the country’s dependence on imported fertilizer, leading to PBR reversing its strategy. The two companies agreed on a tolling contract, whereby PBR would supply natural gas in return for fertilizers. However, the tolling arrangement fell through as it would have caused Petrobras a loss of $79.81 million.
Nevertheless, the ongoing negotiations are designed to provide both parties with a sustainable and profitable framework.
Future Implications
Petrobras’ 2025-2029 Business Plan highlights the importance of the fertilizer segment in its portfolio. By integrating fertilizer production with its oil, gas and energy transition goals, the company aims to capture new streams while addressing domestic agricultural demands.
The revival of these plants also reflects Brazil’s broader commitment to economic self-reliance and sustainable growth.
PBR’s Zacks Rank and Other Key Picks
Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil. Currently, PBR has a Zacks Rank #2 (Buy).
Investors interested in the energy sector might look at other top-ranked stocks like ARC Resources Ltd. AETUF, Gulfport Energy Corporation GPOR and YPF Sociedad Anónima YPF.ARC Resources, Gulfport Energy and YPF Sociedad Anónima currently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Calgary, Canada-based ARC Resources is engaged in the exploration, acquisition and development of oil and natural gas properties. AETUF’s expected EPS growth rate for next year is 50.78%, which aligns favorably with the industry growth rate of 10.50%.