Barclays Capital (NYSE:BCS) analyst Paul Cheng downgraded Petrobas (NYSE:PBR) from "Overweight" to "Equalweight," citing concerns over the spending of the company.
With Petrobras profits considered a means of socialist programs of the Brazilian government, uncertainty over how deeply the government may rob the Petrobras piggy bank is weighing on the mind of Cheng, and other investors as well.
If Petrobras is tapped in a big way by the incoming Brazilian government, it would mean a "lower future return for Petrobras' minority shareholders over the next several years."
Other spending concerns are the move to an increased domestic refining capacity, which could result in capital expenditures of over $150 billion over the next decade, said Cheng.
In the past Petrobras added capacity overseas inexpensively as their strategy.
Petrobras common shares closed at $35.09 Wednesday, dropping $1.62, or 4.41 percent.
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