We feel now is a pretty good time to analyse 3R Petroleum Óleo e Gás S.A.'s (BVMF:RRRP3) business as it appears the company may be on the cusp of a considerable accomplishment. 3R Petroleum Óleo e Gás S.A. engages in the exploration and production of oil and natural gas in Brazil. The R$4.8b market-cap company announced a latest loss of R$259m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is 3R Petroleum Óleo e Gás' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
3R Petroleum Óleo e Gás is bordering on breakeven, according to the 2 Brazilian Oil and Gas analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of R$187m in 2021. The company is therefore projected to breakeven around a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 119% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of 3R Petroleum Óleo e Gás' upcoming projects, but, take into account that generally an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing we would like to bring into light with 3R Petroleum Óleo e Gás is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in 3R Petroleum Óleo e Gás' case is 59%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on 3R Petroleum Óleo e Gás, so if you are interested in understanding the company at a deeper level, take a look at 3R Petroleum Óleo e Gás' company page on Simply Wall St. We've also put together a list of important aspects you should further research:
- Valuation: What is 3R Petroleum Óleo e Gás worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether 3R Petroleum Óleo e Gás is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on 3R Petroleum Óleo e Gás’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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