Goldman Sachs expects Latin American NOCs' 2Q results to be broadly above consensus, with Petrobras as the core preference

Overview

This Goldman Sachs report previews the 2Q results of national oil companies within its Latin American oil and gas coverage, focusing on Petrobras, YPF, and Ecopetrol. Core themes include the impact of fuel subsidies on Petrobras pricing and working capital, the normalization in 2Q of Brent timing mismatches, production ramp-up, the potential impact of Colombia's government transition on Ecopetrol's business plan, and updates to target prices and valuation assumptions.

Core views

Goldman Sachs views Petrobras as offering the most attractive risk-reward: 2Q EBITDA is expected to exceed consensus, with crude oil production growth and improved Brent price pass-through supporting earnings, while 2027E free cash flow yield and dividend yield are around 17%. Fuel subsidies will create short-term receivables and working capital pressure, but if diesel prices in 2H are reduced alongside lower oil prices and crack spreads, the subsidy burden could gradually decline and release working capital. YPF's downstream profit may beat consensus, but the rating remains Neutral; Ecopetrol benefits from more market-friendly Colombian macro and policy expectations, but its valuation is not as attractive as Petrobras on a relative basis.

Analysis framework

The report uses a 2Q earnings preview, comparisons with Bloomberg consensus, the Brent forward curve, Platts high-frequency traded differentials, production ramp-up assumptions, EV/EBITDA target multiples, and a free cash flow yield framework to assess each company's earnings, cash flow, dividends, and target price.

Methodology notes

• Earnings preview2Q EBITDA relative-to-consensus analysis

  Compare company 2Q adjusted EBITDA forecasts with Bloomberg consensus.

  Petrobras is expected to come in 5% above consensus, YPF 21% above, and Ecopetrol 6% above, helping indicate the likely direction of earnings-season surprises.

• Commodities and price pass-throughBrent forward curve and pricing timing mismatch analysis

  Compare the Brent 1-month forward benchmark and the impact of delayed pricing on realized selling prices.

  The report believes Petrobras did not fully capture the oil price increase in 1Q because of delivery and pricing lags, while this mismatch should ease meaningfully in 2Q.

• Policy and cash flowFuel subsidy and working capital analysis

  Assess the impact of government diesel and gasoline subsidies on effective selling prices, receivables, and cash flow.

  The subsidies lower purchase prices for end distributors, but delayed government payments create receivables for Petrobras, with 2Q working capital drag estimated at about USD 2.3bn.

• Valuation methodsEV/EBITDA target multiples and 12-month target price

  Estimate target prices using 12-month forward or 2028E EV/EBITDA multiples.

  Petrobras maintains a target EV/EBITDA of 3.5x, YPF maintains 2028E 3.2x, and Ecopetrol's target multiple is raised from 4.2x to 4.3x.

• Factor frameworkGS Factor Profile

  Goldman Sachs compares stocks across four attributes: Growth, Financial Returns, Multiple, and Integrated.

  The appendix explains that this framework is used to compare growth, returns, and valuation percentiles across covered stocks and industry peers, though the main conclusions of this report still come from the earnings preview and valuation updates.

Asset mapping & comparison

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

• Petrobras (PETR3.SA/PETR4.SA/PBR/PBR_A)

  Core covered name and relative preference, rated Buy.

  Strengths

  2Q EBITDA is expected to exceed consensus, crude oil production is growing quarter-on-quarter and year-on-year, Brent pricing mismatch is easing, 2027E FCFy and DY are about 17%, and dividend appeal is strong.

  Weaknesses

  Delayed fuel subsidy payments increase receivables, causing about USD 2.3bn of working capital drag in 2Q; lower 2026/27E Brent assumptions reduce the target price by about 2%.

  Comparison

  Relative to Ecopetrol, Petrobras offers about 17% 2027E FCFy under similar Brent assumptions, significantly above Ecopetrol's roughly 9%.

  Risks

  Lower-than-expected Brent prices, BRL appreciation, weaker-than-expected production, government intervention, and changes in subsidy policy.

• YPF Sociedad Anónima (YPF)

  2Q results may beat consensus, but the rating remains Neutral.

  Strengths

  2Q adjusted EBITDA is expected at USD 2.3bn, 21% above consensus; earlier fuel price increases and higher crack spreads supported downstream earnings; target price raised to USD 54.30.

  Weaknesses

  The company kept fuel prices stable during part of 2Q to protect demand, creating uncertainty around pass-through of oil price and FX fluctuations.

  Comparison

  Although the magnitude of potential consensus upside is greater, the report does not list it as a relative preference, leaving its allocation appeal weaker than Petrobras.

  Risks

  Realized oil and gas prices above or below expectations, future production deviating from expectations, insufficient or excessive pass-through of FX depreciation into crude and refined product prices, and valuation changes from new shale oil discoveries.

• Ecopetrol (EC/ECO.CN)

  Supported by improved policy expectations, but the rating remains Neutral.

  Strengths

  2Q adjusted EBITDA is expected at USD 4.8bn, 6% above consensus; Colombia's shift toward a more market-friendly government may bring catalysts including management changes, efficiency gains, unconventional resource development, Brava stake acquisition, and asset sales.

  Weaknesses

  Valuation is not sufficiently attractive, and some potential upside may already be reflected in the share price; 2027E FCFy is about 9%, below Petrobras.

  Comparison

  Relative to Petrobras, free cash flow yield and dividend appeal are weaker, so it does not represent Goldman Sachs' top pick in Latin American oil and gas.

  Risks

  Oil price upside or downside, future production deviating from expectations, rapid decline in oil and gas reserves, and uncertainty in policy execution and M&A delivery.

• Vista Energy

  Listed by the report as one of the relative preferences within Latin American oil and gas coverage, rated Buy.

  Strengths

  Goldman Sachs reiterates its relative preference for PBR and Vista.

  Weaknesses

  This report does not elaborate on Vista's 2Q earnings preview or valuation details.

  Comparison

  Together with Petrobras it forms the report's preferred combination, though the main text is clearly more focused on Petrobras.

  Risks

  The main text does not provide Vista-specific risks; separate research should be consulted.

Key data

• Petrobras 2Q adjusted EBITDAUSD 17bn, 5% above Bloomberg consensusSupported by crude oil production growth and improved Brent price pass-through.
• Petrobras crude oil production2Q expected at +18% year-on-year, +6% quarter-on-quarter, about +147kbpd; full-year expected at about +13% year-on-yearRamp-up from FPSO P-79 and other new platforms offsets declines in mature assets, with the full-year forecast about 8% above the midpoint of company guidance.
• Petrobras dividendsExpected to announce USD 3.4bn with 2Q results, implying a dividend yield of about 3.1%Assumes CAPEX of USD 4.4bn and is based on the 45% quarterly FCF payout policy.
• Fuel subsidy impactEffective diesel price of about BRL 3.30/liter, about 20% below the international benchmark; 2Q working capital drag of about USD 2.3bnThe subsidy includes BRL 0.35/liter and BRL 1.12/liter, with delayed government payments creating receivables.
• Petrobras valuation and target price12-month forward EV/EBITDA of 3.5x; target prices for PETR3.SA/PETR4.SA/PBR/PBR_A are BRL 55.00/BRL 51.40/USD 22.10/USD 20.60Target prices are all lowered by about 2% from prior levels, mainly reflecting a 4% cut to 2026/27E average Brent price assumptions.
• YPF 2Q adjusted EBITDAUSD 2.3bn, 21% above Bloomberg consensusFuel prices remained stable for part of 2Q, but earlier 1Q price hikes and higher crack spreads supported downstream profit.
• YPF target priceUSD 54.30, previous USD 50.30Neutral maintained, with 2028E target EV/EBITDA at 3.2x and refining margin assumptions raised to USD 19/22/18/bbl.
• Ecopetrol 2Q adjusted EBITDAUSD 4.8bn, 6% above Bloomberg consensusInvestors are more focused on management, efficiency, asset development, and M&A possibilities after Colombia's government transition.
• Ecopetrol target priceEC USD 14.60；ECO.CN COP 2,596Target price raised by about 1%, with the 12-month forward EV/EBITDA target multiple increased to 4.3x and a COP/USD assumption of 3,561.
• Relative valuation comparisonPetrobras 2027E FCFy of about 17%, Ecopetrol about 9%, both assuming Brent at USD 72/bblGoldman Sachs believes some of Ecopetrol's positives may already be priced in, while Petrobras is more attractive.

Impact & implications

For investors, the main implication of the report is that the 2Q earnings season may bring confirmation of Petrobras earnings and dividends, while the market will need to distinguish between improved accounting profit and cash flow drag caused by subsidy receivables. In relative positioning, Goldman Sachs prefers Petrobras and Vista; although Ecopetrol has improving policy expectations, its valuation lacks sufficient margin of safety; although YPF may beat consensus, price controls, demand protection, and FX pass-through still limit room for a rating upgrade.

Risks

• Lower-than-expected Brent oil prices would compress upstream earnings, cash flow, and dividend capacity.
• Delayed fuel subsidy payments may continue to tie up Petrobras working capital and weaken 2Q free cash flow performance.
• Government intervention, subsidy policy changes, or domestic refined product price adjustments could alter Petrobras's profit and cash flow trajectory.
• If new platform ramp-up falls short of expectations, or mature asset decline is faster than expected, Petrobras production growth will be affected.
• Changes in local currencies such as BRL or COP would affect ADR valuation, costs, and the translation of local-share target prices.
• YPF faces policy trade-offs among fuel price pass-through, FX depreciation pass-through, and demand protection.
• Ecopetrol faces risks from declining reserves, weaker-than-expected production, and uncertainty in policy execution and M&A realization.

What to watch

• Petrobras 2Q results on August 6: adjusted EBITDA, CFO, CAPEX, dividends, and changes in subsidy receivables.
• The payment pace of Brazil's diesel and gasoline subsidies, and whether diesel prices in 2H are reduced in line with lower forward oil prices and crack spreads.
• Whether Petrobras crude unloading prices in Platts high-frequency data continue to normalize relative to the Brent 1-month forward benchmark.
• Whether FPSO P-79 and other new platform ramp-ups can offset mature asset decline and support 2026/27E production above guidance.
• YPF's August 4 results for downstream earnings, the fuel price stability policy, and realization of refining margins.
• After Ecopetrol's August 10 results, changes to its business plan, management adjustments, efficiency improvements, unconventional resource development, Brava stake acquisition, and progress on asset sales.