Brazil, known for being the ninth-biggest oil producer globally and the largest in South America, is now the 14th - and newest - member of the OPEC+ group of oil-producing nations. The move will become official as of January 2024, and immediately raised questions over whether Brazil would follow suit with fellow OPEC+ peers Russia and Saudi Arabia by slashing production.

This decision is a game-changer for both the global oil market and Brazil's oil industry, and it's set to bring the share of global oil production controlled by OPEC+ up to 62%. But what could it mean for Brazil's oil behemoth, Petroleo Brasileiro SA (PBR) - better known as Petrobras?

The mammoth state-controlled energy company, valued at over $96 billion by market cap, is Brazil's top dog when it comes to oil and gas. Over 50% owned by Brazil's federal government, PBR manages a whopping 30% of the country's oil production and exploration. Along with its upstream operations, Petrobras is also engaged in refining, transport, and marketing, as well as renewables. 

PBR shares have slumped since the OPEC+ news was confirmed, but value investors should take note - this energy dividend stock looks compelling at current levels ahead of a transformative 2024. 

Petrobras Is Priced at a Discount

Petrobras stock has outperformed the broader U.S. markets in 2023, with the shares up 38% on a YTD basis. By comparison, the S&P 500 Index ($SPX) is up just shy of 19% on the year, while the sector-focused S&P 500 Energy Sector SPDR (XLE) is slightly negative.

Despite the share price outperformance, PBR still looks like a good value at current levels.

Currently, Petrobras is priced at 4x forward EPS and 0.91x forward sales, and the price/book ratio is 1.20. All of these valuation metrics are well below the sector median for energy stocks, indicating PBR is attractively priced at current levels.

In its latest quarterly earnings report, Petrobras fell short of analysts' expectations. Revenue jumped by 5.4% compared to the prior year and arrived at $25.6 billion, while net income fell 31.2% dip to $5.5 billion, or $0.86 per share. Petrobras chalked up the miss to higher costs, lower oil prices, and unfavorable exchange rate impacts.

Looking ahead, analysts expect PBR's negative EPS trend to slow considerably in fiscal 2024. After an expected 27% drop to EPS of $3.86 this year, Wall Street is targeting a milder 4.9% decline to $3.67 in FY 2024.

PBR Invests in Growth, Dividends

Notably, Petrobras CEO Jean Paul Prates has clarified the publicly run company won't be partaking in coordinated output caps. According to the CEO, he expects Brazil to participate in OPEC+ as “some kind of observer member,” and noted the membership should be crucial to support energy transition efforts.

In addition to this, Petrobras has laid out an ambitious investment plan spanning 2024 to 2028. The energy company is boosting its capex spend substantially to $102 billion, earmarked for exploration, production, and low-carbon initiatives. The objective here is clear – to enhance production capacity and strengthen the commitment to sustainability.

Income investors should note that Petrobras serves up a forward dividend yield around 10%, with quarterly dividends set at $0.37. Plus, with a reasonable dividend payout ratio of 33%, PBR is keeping most of its earnings for reinvestment and growth. 

What Do Analysts Expect for PBR?

Meanwhile, analysts think the dividend energy stock is a buy. Out of 7 analysts, 4 rate PBR a "Strong Buy," with 3 opting for a “Hold” - and not a single “Sell” rating in sight. 

Plus, the mean target price sits at $16.71, implying more than 13% expected from current levels.