Brazil Extends 12% Crude Oil Export Tax, Leaving PRIO with the Highest Earnings Exposure

Overview

This report is a Goldman Sachs quick take on policy changes in Brazil’s energy sector. The key event is the Brazilian government’s extension of the 12% crude oil export tax for another two months. The tax was initially implemented through a provisional measure in March against the backdrop of rising global oil prices driven by the Middle East conflict. Although the policy was originally due to expire, the government chose to extend it and reassess it after 30 days. The report focuses on the policy’s earnings impact on Brazilian oil and gas equities and differences in exposure across companies.

Core views

Goldman Sachs believes that the extension of the crude oil export tax creates negative earnings pressure for Brazilian oil and gas companies, particularly posing downside risk to 3Q earnings consensus estimates. PRIO is the most affected covered stock because nearly 100% of its production is exported, followed by BRAV and Petrobras, which have approximately 40%-50% export exposure. The market had previously focused more on the tax being canceled or reduced to 5%-6%, so maintaining it at 12% could be below investor expectations. However, Goldman Sachs’s model already conservatively assumes that the 12% tax rate will remain in place through year-end, limiting the incremental impact of the policy on its model.

Analysis framework

The report applies a policy event-driven analysis, combining the tax rate, duration, and companies’ export exposure to assess the potential impact on earnings expectations. It also uses Goldman Sachs’s existing valuation frameworks and ratings to rank the relative impact on PRIO, Brava Energia, and Petrobras. PRIO’s target price is based on DCF, a 10.2% nominal U.S. dollar WACC, and a 15% average target dividend yield for 2027-2031. Petrobras’s target price is based on a 12-month forward EV/EBITDA multiple of 3.5x.

Methodology notes

• Valuation methodsDCF

  Discounted Cash Flow Valuation

  PRIO’s 12-month target price uses a DCF framework and a 10.2% nominal U.S. dollar WACC.

• Valuation methodsDividend Yield Target

  Target Dividend Yield

  PRIO’s valuation also references a 15% average target dividend yield over the next five years from 2027 to 2031, including a premium of approximately 5 percentage points over U.S. oil and gas exploration and production companies to reflect higher country and execution risks.

• Valuation methodsEV/EBITDA Multiple

  Enterprise Value/EBITDA Multiple

  Petrobras’s target price is based on a 12-month forward EV/EBITDA multiple of 3.5x, with the multiple unchanged.

• Factor AnalysisGS Factor Profile

  Goldman Sachs Factor Profile

  This framework compares the relative positioning of individual stocks versus the broader market and industry peers across growth, financial returns, valuation multiples, and composite metrics.

• M&A AnalysisM&A Rank

  M&A Probability Ranking

  Goldman Sachs uses an M&A rank from 1 to 3 to assess acquisition probability: 1 represents a high probability of 30%-50%, 2 represents a medium probability of 15%-30%, and 3 represents a low probability of 0%-15%.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• PRIO / PRIO3.SA

  Covered stock most affected by the crude oil export tax

  Strengths

  Goldman Sachs maintains a Buy rating and a 12-month target price of BRL 64.30; long-term valuation remains supported by the DCF and dividend yield frameworks.

  Weaknesses

  Nearly 100% of production is exported, making the company highly sensitive to the 12% export tax.

  Comparison

  Compared with BRAV and Petrobras, PRIO has the highest export exposure and therefore the highest policy sensitivity.

  Risks

  Lower oil prices, further delays to the Wahoo project, production declining faster than expected, BRL appreciation, and the export tax remaining in place for longer.

• Petrobras / PETR3.SA / PETR4.SA / PBR / PBR__A

  Large Brazilian oil and gas company with moderate export tax exposure

  Strengths

  Goldman Sachs maintains a Buy rating, with target prices based on a 12-month forward EV/EBITDA multiple of 3.5x; the coverage includes multiple listed securities.

  Weaknesses

  With approximately 40%-50% export exposure, the tax extension could weigh on 3Q earnings.

  Comparison

  Exposure is lower than PRIO’s but the policy impact remains significant; Petrobras is in the same 40%-50% exposure range as BRAV.

  Risks

  Brent prices below expectations, BRL appreciation, production below expectations, and potential government intervention.

• Brava Energia / BRAV3.SA

  Brazilian energy company affected by the export tax but not rated by Goldman Sachs

  Strengths

  The report identifies its tax exposure as approximately 40%-50%.

  Weaknesses

  Not Rated, with no current Goldman Sachs investment rating or target price support.

  Comparison

  Policy exposure is lower than PRIO’s and similar to Petrobras’s.

  Risks

  Extension of the export tax, downward revisions to earnings expectations, and policy uncertainty.

• Brazilian Oil and Gas Equities

  Industry asset class affected by the policy event

  Strengths

  The backdrop of rising oil prices may support revenue, but it also encourages the government to maintain the export tax.

  Weaknesses

  The higher tax burden reduces export profits and increases the policy risk discount.

  Comparison

  Companies with higher export shares are more heavily affected.

  Risks

  The tax rate rising rather than falling or the extension lasting longer than expected, geopolitical escalation, and increased government intervention.

Key data

• Crude Oil Export Tax Rate12%The Brazilian government is maintaining the current export tax rate on international oil shipments.
• Extension Periodadditional two monthsThe government will reassess whether to maintain or modify the measure after 30 days.
• PRIO Export Exposurenearly 100% of production exported, GSeGoldman Sachs considers PRIO the company within its coverage universe most sensitive to the measure.
• BRAV and Petrobras Export Exposure40%-50%The impact on the two companies is lower than on PRIO, but they still have meaningful earnings exposure.
• PRIO3.SA Target PriceBRL 64.30Rated Buy, with a 12-month target price.
• Petrobras Target PricesPETR3.SA BRL 55; PETR4.SA BRL 51.4; PBR USD 22.1; PBR__A USD 20.60Rated Buy, based on a 12-month forward EV/EBITDA multiple of 3.5x.
• Brava Energia RatingNot RatedThe report explicitly states that Brava Energia is not rated.
• Goldman Sachs Global Equity Coverage Rating DistributionBuy 50%; Hold 34%; Sell 16%Global equity coverage rating distribution disclosed in the report appendix.

Impact & implications

The extension has dashed investors’ expectations for tax relief in 3Q and could weigh on near-term earnings expectations and market sentiment toward Brazilian oil and gas companies. Because PRIO has the highest export dependence, its share price and earnings are the most sensitive. Petrobras and BRAV also have moderate exposure. If Middle East geopolitical risks continue to support oil prices and encourage the government to maintain the tax, policy risk could remain a valuation discount factor for Brazilian oil and gas stocks.

Risks

• The 12% crude oil export tax remains in place longer than the market expects.
• 3Q earnings consensus estimates face downside revisions.
• An escalation in Middle East geopolitics leads the government to extend the tax measures.
• Brent prices come in below expectations.
• BRL appreciation weighs on earnings or valuations denominated in local currency.
• The PRIO Wahoo project experiences additional delays.
• PRIO production declines faster than expected.
• Petrobras faces potential government intervention and production falling short of expectations.

What to watch

• The Brazilian government’s reassessment of the export tax after 30 days.
• Whether the tax rate is reduced from 12% to 5%-6% or remains at the current level.
• Whether 3Q earnings consensus estimates are revised downward, particularly for PRIO, BRAV, and Petrobras.
• The impact of the Middle East conflict and global oil price movements on Brazil’s policy choices.
• PRIO export volumes, Wahoo progress, and the production trajectory.
• Petrobras production, Brent price assumptions, and signs of government intervention.