• Resilient FY2025 financial performance compared to FY2024 despite lower average realised oil prices (USD$69.06 in FY2025 vs USD$80.76 in FY2024). Adjusted EBITDA rose 5% YoY to USD$42.5b, with margins stable at 49%.
• Production efficiency saw Petrobras increase total barrels lifted, at an overall lower cost compared to FY2024 due to a ramp-up in output, particularly from new offshore fields.
• Operating Cash flow conversion from EBITDA continues to strengthen, supporting positive free cash flow across the cycle.
• Debt levels ticked down slightly, while credit metrics remain stable. Total liquidity of USD 11.1b mostly covers near-term obligations.
• About the bonds: we continue to like the 2030-2035 USD bonds, offering yield-to-worst of 5+% to 6+%, representing attractive yield pickups compared to international oil majors’ comparable bonds.
We previously initiated coverage on Petrobras and its bonds earlier this year. Check out the related article here:
Idea of the Week: Locking in 5–7% Yields on a Global Energy Leader
Resilient FY2025 Performance despite lower oil prices
Petrobras navigated a difficult oil price environment with quiet resilience in FY2025. Average realised Brent oil prices fell 14.5% YoY to USD$69.06/bbl (per barrel) compared to FY2024’s USD$80.76/bbl, yet revenue held up relatively well at USD$89.2b, a modest 2.4% YoY decline from USD$91.4b in FY2024. We highlight that this modest top-line softness understates the group’s underlying strength: volume growth (+11% YoY) absorbed much of the price shortfall, demonstrating Petrobras’ ability to grow barrels lifted even as prices turned against it.
The story, however, is better told at the EBITDA level. Adjusted EBITDA expanded 5.3% YoY to USD$42.5b (FY2024: USD$40.4b), a testament to Petrobras’ operational discipline. We note this EBITDA figure trails its 5-year average of USD$49b (see chart 1 below). EBITDA margin also improved to 48% from FY2024’s 44% as the group successfully scaled production volumes, which offset the slight pickup in lifting costs (FY2025: USD$6.36 compared to FY2024: USD$6.17), providing a meaningful natural hedge against weakened realised prices.
Net income (excluding one-off items) declined 6.5%, reflecting two compounding factors: 1) the direct flow-through of lower Brent prices into revenue, and 2) a pickup in depreciation and amortisation (D&A) as newly commissioned FPSO units transitioned from construction into operation. We do not view this as a red flag – we note this D&A (a non-cash expense) headwind is structurally positive as new FPSO (floating production, storage and offloading) capacity lays the groundwork for sustained production growth ahead.
Looking ahead, the setup for Petrobras is considerably more attractive than when we first initiated coverage back in February 2026. The ongoing Middle East conflict has provided a meaningful tailwind, with Brent futures prices surging to USD$118/bbl at its peak and 1Q2026 (Jan-Mar) averaging USD$78.4/bbl – already a meaningful step-up versus FY2025 realised prices. We highlight that longer-dated futures for Brent prices (July 2026 – Dec 2027), remain elevated, ranging from USD$77/bbl to USD$99/bbl, which provides longer-term stability for Petrobras’ revenue profile. With critical regional infrastructure still impaired and the Strait of Hormuz yet to fully reopen at the time of writing, we believe the oil price environment heading into FY2026 is structurally more supportive.
We further highlight that constrained Hormuz output could serve as a demand catalyst for Petrobras specifically, as key importers, most notably China (37% of foreign market sales), are compelled to redirect crude purchases away from Gulf producers toward alternative Atlantic Basin suppliers. We think this dynamic has the potential to turn structural, as importing nations increasingly look to reduce their dependence on the Middle East, a shift that Petrobras – as a large-scale Atlantic Basin producer operating outside of the Middle East supply corridor – is uniquely positioned to capitalise on.
Chart 1: Revenue + Adjusted EBITDA
Operational efficiency is displayed with more barrels lifted at lower costs
More importantly, Petrobras delivered a standout operational year in FY2025. As seen in Chart 2 below. total oil and gas production reached 2.99 Mboed (thousand barrels of oil equivalent per day), up 11% YoY from 2.70 Mboed in FY2024, meaningfully ahead of the group’s own 2025-2029 Business Plan target of 2.8 Mboed (7% higher than total production level). We highlight this as a clear signal that the group’s FPSO ramp-up strategy is working as intended.
The volume story is compelling. 3 new production units came online during the year – leased FPSOs Almirante Tamandaré (Búzios 7) and Alexandre de Gusmão (Mero 4), alongside the company-owned FPSO P-78 (Búzios 6) — collectively adding 585 mbpd (thousand barrels per day) of production capacity. Complementing these additions, existing FPSOs maintained peak or ramping production throughout the year. The result: oil exports hit a record 999 mbpd barrels per day in 4Q2025 alone.
On unit economics, the story is one of genuine structural improvement. All-in lifting costs (inclusive of production taxes and leases) declined 8% YoY to USD$20.65/boe (barrel of oil equivalent) in FY2025 from USD$22.44/boe in FY2024 (see Chart 3 below). We think this compression, achieved against a backdrop of rising production volumes, is the clearest proof that Petrobras is harvesting the benefits of its multi-year FPSO investment cycle.
Breaking down the drivers, we distinguish between structural and cyclical factors.
On the structural side, the improvements are durable and compelling. The start-up of modern high-efficiency FPSOs, alongside the permanent decommissioning of older, higher-cost FPSOs materially improved the overall fleet cost profile. Higher operational efficiency at Búzios and across the broader ultra-deepwater pre-salt portfolio further reduced per-barrel costs. We note, however, that base lifting costs excluding government take and leases, edged up ~5% to USD$6.35/boe from USD$6.05/boe, driven by higher gas transportation expenses, platform integrity services, subsea inspections, and the resumption of production at higher-cost Campos Basin platforms. We view these as manageable and largely structural in nature, rather than a sign of operational deterioration. Critically, these costs were more than fully absorbed at the all-in level by the volume-driven dilution effect.
On the cyclical and market-driven side, two additional tailwinds supported the cost improvement. First, the Brazilian real’s (BRL) depreciation on a full-year average basis (5.59 BRL/USD in Fy2025 vs 5.39 BRL/USD in FY2024) reduced the dollar-equivalent of BRL-denominated operating expenses. Second, and more meaningfully, production taxes declined 6.4% YoY to USD$10.6b, reflecting the mechanical impact of lower Brent prices on special participation levies. We highlight this as a double-edged sword; while it supported the FY2025 cost improvement, it also means government take could move in the opposite direction in the current environment of higher oil prices. Furthermore, we highlight the recent enactment of a 12% export tax on crude oil exports and a 50% export tax on diesel exports, which could negatively affect realised export prices. That said, we believe this negative effect could be partially offset by an increase in export volumes, as countries look to diversify their oil supplies away from the Middle East.
Looking forward, we think Petrobras’ efficiency trajectory has further room to run. The recently commissioned FPSOs are still ramping toward full capacity and additional units – P-79 (Búzios 8, 180 mbpd) in 2026, followed by P-80, P-82, and P-83 (225 mbpd each) through 2027 — are set to add further low-cost pre-salt barrels to the mix. Pre-salt lifting costs remain highly competitive at USD$4.19/boe, and with pre-salt representing the dominant share of the production base, we think the group’s structural cost improvement story is well-supported.
Chart 2: Total Production
Chart 3: General trend of lower lifting costs
Resilient and efficient cash flow generation with projected capex internally funded
Petrobras’ cash generation engine held up well in FY2025, producing USD$36.0b in operating cash flow (OCF), which is broadly in line with FY2024’s US$38.0b and a notably resilient outcome (see Chart 4 below) given the 14.5% decline in average realised Brent prices. We highlight this as evidence that the group’s growing production base is doing real work in absorbing lower oil prices.
After subtracting this cash capex of USD$19.5b (compared to FY2024 of USD$14.6b), FCF for FY2025 came in at USD$16.5b, representing a step down against FY2024’s USD$23.3b. We view this decline in FCF as intentional and investment-cycle driven, rather than reflective of any underlying deterioration in cash generation quality.
As seen in Chart 5 below, EBITDA-to-OCF conversion averaged 85% for the full year, reflecting a well-managed working capital profile and a cost structure that converts earnings into cash efficiently. Free cash flow (FCF) conversion softened to 39% for FY2025 from 58% in FY2024, largely because of the step-up in cash capital expenditure (capex) to USD$19.5b (from USD$14.6b in FY2024) as Petrobras accelerates its FPSO build-out. That said, we are still comfortable with this metric as it sits within the 35-45% range observed across its global oil major peers.
Looking ahead, the cash flow outlook remains constructive. With one of the lowest lifting cost structures in the global oil and gas (O&G) sector, Petrobras carries a durable anchor for cash flow margins through the oil price cycle. Management guides OCF to ramp from USD$35b in 2026 to USD$42b by 2027-2030, supported by continued production growth and the progressive FPSOs ramp-ups. Cash capex is expected to remain elevated near-term, with management guiding USD$18b in 2026 and USD$20-21b through 2027-2028, before moderating to USD$17b in 2029-2030 as the FPSO construction cycle peaks and rolls over. We think OCF generation will improve meaningfully as capex normalises post-2028, underpinned by growing volumes and a low-cost operating base. It is worth noting that Petrobras underwrites new projects at an average brent breakeven price of USD$25/bbl, against a planned assumption of USD$68/bbl in average oil prices, providing a comfortable buffer.
Chart 4: OCF + capex + FCF
Chart 5: Cash flow conversion vs EBITDA
Debt profile remains well-laddered, with manageable leverage
Gross debt rose 15.7% YoY to USD$69.8b as of 31 December 2025 (31 December 2024: USD$60.3b), as seen in Chart 6 below. However, do note that this increase is almost entirely a function of lease accounting. As highlighted in our initiation, the commissioning of new FPSOs is recorded under long-term lease commitments (treated as debt under IFRS accounting standards). Crucially, this increase in lease obligations is backed by productive, revenue-generating FPSO assets deployed across Petrobras’ high-margin ultra-deepwater fields of Búzios and Mero ultra-deepwater fields.
Stripping out the leases tells a more reassuring story. Looking at financial debt (bank loans and bonds), we see a slight tick up from USD$23.2b as of end FY2024 to USD$26.4b as of end FY2025, driven by an increase in debt issuances as management took advantage of better rates (weighted average interest rate moderated to 6.7% from 6.8% a year prior).
On the liquidity front, Petrobras carries USD$9.2b in adjusted cash and equivalents, alongside USD$1.9b in undrawn credit lines, giving the group a total available liquidity of USD$11.1b. This covers 42% of Petrobras outstanding financial debt and most of the group’s current gross financial debt maturities (USD$12.2b). Including leases, Petrobras’ available liquidity covers 16% of gross debt. Looking further out, roughly 70% of financial debt matures post-2030, ensuring a light near-term funding requirement. Combined with Petrobras consistent FCF-generating ability, we see little immediate refinancing risk.
On debt metrics (see Table 1 below), net debt/EBITDA edged up to 1.4x (compared to 31 December 2024: 1.3x). However, we note a strengthening of the group’s EBITDA / Interest coverage metric, which rose from 6.8x to 9.9x, on the back of lower interest expense of USD$4.3b (FY2024: USD$6.0b). Meanwhile, FCF (post mandatory dividends) / interest expense remained stable at 2.1x (FY2024: 2.2x). Debt to capitalisation, however, improved to 47.9% from 50.4% a year prior. Overall, we think Petrobras balance sheet remains decent, with a moderate and manageable leverage profile.
Chart 6: Debt breakdown
Table 1: Debt metrics
|
Metrics |
Dec '22 |
Dec '23 |
Dec '24 |
Dec'25 |
|
Gross debt (USD Bn) |
53.8 |
62.6 |
60.3 |
69.8 |
|
Cash (USD Bn) |
12.3 |
17.9 |
8.1 |
9.2 |
|
Net Debt/ LTM EBITDA (x) |
0.6 |
0.9 |
1.3 |
1.4 |
|
Debt/ Capitalisation (%) |
43.5% |
44.2% |
50.4% |
47.9% |
|
LTM EBITDA interest coverage (x) |
28.0 |
23.2 |
6.8 |
9.9 |
|
Free cash flow* interest coverage (x) |
6.8 |
7.5 |
2.2 |
2.1 |
|
Source: Bloomberg, iFAST
compilations. |
||||
Recent fuel subsidies and Petrobras’ enduring political risks
Beyond direct subsidies, we note the ongoing legislative discussions around restricting new field developments, particularly for fields still in the exploration phase. If enacted, this could materially constrain Petrobras’ long-term investment plans and production growth.
Overall, we think these actions demonstrate the government’s active role in shaping the Brazilian energy landscape and the risks related to government intervention which could affect Petrobras’ operations and financials. That said, we highlight Petrobras’ cost structure of a project-level Brent breakeven of USD$25/bbl, the increase in export volumes, and a constructive oil price environment provide meaningful insulation against intervention risk.
Recommendations
Table 2: Petrobras USD bonds
|
Issue |
Ask price |
Yield to Worst (%) |
Years to Maturity |
Z-Spread (bps) |
|
99.24 |
5.32% |
4.38 |
166.4 |
|
|
101.62 |
5.19% |
4.70 |
152.6 |
|
|
104.16 |
5.76% |
7.20 |
200.9 |
|
|
101.46 |
5.78% |
8.73 |
195.7 |
|
|
99.56 |
6.94% |
22.92 |
280.7 |
|
|
Source: Bloomberg, Bondsupermart, iFAST Compilations. Data as of 24 April 2026. |
||||
We still find Petrobras’ credit profile to be decent, consistent with our last update in February 2026, underpinned by resilient cash generation and improved operational metrics. While certain coverage ratios have softened, we remain comfortable with the group’s overall leverage and coverage profile, particularly against the backdrop of a more constructive oil price environment.
We continue to find value in Petrobras outstanding USD bonds, particularly those maturing between 2030 and 2035, offering yields ranging from 5.19% to 5.78%. In particular, the 2033 and 2035 tenors stand out to us, offering a compelling Z-spread pickup, a differential we think partly reflects market uncertainty around capex plans post-2030 rather than any fundamental credit deterioration.
Across its outstanding bonds, Petrobras offers yield spreads ranging from 150+ bps to 280+ bps over comparable US sovereigns. Against its oil major peers, including Shell, Exxon, Equinor, BP, and ConocoPhillips, we see attractive relative yield pickups across the curve. Note: These oil majors have significantly stronger credit ratings, ranging from A+ to AAA by Fitch, against Petrobras (BBB by Fitch).
In sum, we think the 2030 to 2035 bond segment of the Petrobras bond curve offers investors compelling income for a group that is well-positioned to benefit from the Middle East conflict. For investors considering the 2049 bond, we highlight the meaningful duration risk inherent where an increase in interest rates could erode total returns in a way that Petrobras’ credit quality alone may not adequately compensate for.
Glossary:
bbl (barrel): standard unit of volume for crude oil and petroleum products
FPSO (Floating production, storage and offloading): a floating facility used by the offshore industry to process, store, and transfer hydrocarbons produced from nearby wells
Boe: barrel of oil equivalent; representing the amount of energy contained in a single 42-gallon barrel of crude oil
Mboed (Thousand Barrels of Oil Equivalent per Day): standard metric for reporting daily production volumes for companies with a mix of oil and gas assets
Mbpd (Thousand Barrels per Day): a volume metric focused exclusively on liquid hydrocarbons, such as crude oil and natural gas liquids (NGLs)
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in PETBRA 6.000% 13Jan2035 Corp (USD). The analyst who produced this report holds NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.
