(Image: Disclosure/ Enauta)
A Brava Energia (BRAV3) has not yet been exciting on the stock market, with an accumulated drop of 21% since its debut on September 9th. Last month, the company's market value shrank by R$4 billion.
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The fall of oiltogether with the stoppage of the Papa Terra field, soured the market's mood. Despite the turbulence, analysts still see potential in the company, resulting from the merger between 3R e Enauta.
This is the case of Bank of America. The bank changed the target price to R$28, a potential increase of 60%, with a purchase recommendation. According to analysts, Brava's valuation has become too attractive and cheap to ignore.
In the report, BofA highlights two points that could make the stock move forward:
- the start of the Complete Development System in the Atlanta field (estimated for mid-November), which for BofA could be transformative, given its strong cash generation capacity;
- the restart of the Papa-Terra field, which is currently scheduled to take place in December.
“Our positive view for the company is based on an attractive valuation – at the current share price, even assuming more conservative reserve development, as well as higher opex (operating expenses) and capex (investments) for 3R assets.”
BofA also sees strong FCFE (cash flow) yields of 29% for 2025 and 2026 (EV/Ebitda of 2.7x for 25E and 2.5x), assuming oil prices of $75/bbl to $70 /bbl, respectively.
Possible potential increases in estimates may occur due to:
- greater productivity in Atlanta (we estimate production of 40 kbpd for 2025 for 100% of the field);
- new drilling at Papa-Terra (we do not undertake any new drilling);
- better onshore operations; and
- stronger oil prices.
Disadvantages include:
- lower oil prices;
- lower production; and
- increased operating and capital expenses;