Citi upgraded its recommendation for PetroReconcavo shares from neutral to buy, assessing that higher oil prices in the international market will translate into higher dividends for shareholders.
On the other hand, the target price for Junior Oil 's shares underwent a slight cut, from R$14 to R$13, given indications of lower production. The new value represents a potential appreciation of 24% compared to the current share price level.
“We expect PetroReconcavo to show improvement in its numbers in the coming quarters, given our projection of higher oil prices, combined with adjustments in natural gas contract prices, which generally lag behind commodity prices, resulting in higher values received in the second half of the year,” says an excerpt from the report by the team led by analyst Gabriel Barra.
These factors led Citi to raise its projection for the company's net profit in 2026 by 6%, to R$ 764 million. The estimate for 2027 underwent an even greater adjustment, of 40%, to R$ 720 million.
The figures gained momentum with the surge in oil prices on the international market due to the war in Iran. Citi raised its estimates for Brent crude in 2026 and 2027 by 17% and 14%, to US$98 and US$80 per barrel, respectively.
This factor, combined with relatively controlled costs and capex, in addition to PetroReconcavo not signaling that it intends to work on large projects or seek transformative M&As , has made Citi analysts more optimistic about the dividends that may be distributed.
"We highlight that, during the release of the results for the first quarter of 2026, the company announced R$ 100 million in interest on equity, which represents a yield of approximately 3%. When annualizing this amount, the yield reaches approximately 13% (11% after taxes)," says an excerpt from the report.
This favorable scenario emerges at a time when PetroReconcavo's shares are exhibiting asymmetrical dynamics: the stock has accumulated a 27.2% drop in 12 months, while oil remains at high levels.
For Citi, this opens up a good opportunity to buy the shares at an attractive valuation , with the dividend aspect as an added bonus.
Analysts say the shares are trading with an estimated free cash flow to equity (FCFE) yield of 14% for this year and 13% for next year, in addition to an EV/EBITDA of 2.6 times for 2026 and 2027.
At around 10:49 AM, PetroReconcavo shares were up 5.72%, trading at R$ 11.09. Year-to-date, the shares have accumulated a gain of 0.73%, raising the company's market value to R$ 3.3 billion.
