Brazil’s Petrobras Reports Nearly $17 Billion Impairment on Assets, Corruption

Brazil’s Petrobras Reports Nearly $17 Billion Impairment on Assets, Corruption
State-run oil company writes off $2.1 billion of alleged bribe payments
Petrobras’s disclosures Wednesday were part of the first audited financial statements released by the oil company in more than eight months

Petrobras’s disclosures Wednesday were part of the first audited financial statements released by the oil company in more than eight months. PHOTO: VANDERLEI ALMEIDA/AGENCE FRANCE-PRESSE/GETTY IMAGES
By PAUL KIERNAN / WSJ
Updated April 22, 2015 7:24 p.m. ET

RIO DE JANEIRO—Brazilian state-run oil company Petróleo Brasileiro SA on Wednesday finally put a price tag on the impact of a corruption scandal that has battered the company’s shares, writing off 6.2 billion reais ($2.1 billion) of alleged bribe payments.

In addition, the company booked an impairment charge of 44.6 billion reais ($14.8 billion) for 2014 after determining that assets were overvalued on its balance sheet. As a result, the company reported a net loss of 26.6 billion reais for the fourth quarter on revenue of 85.04 billion reais. Earnings before interest, taxes, depreciation and amortization stood at 20.06 billion reais, up from 15.55 billion reais a year earlier.

The disclosures were part of the first audited financial statements released by Petrobras in more than eight months. Brazilian federal prosecutors since last year have been investigating allegations that the company’s suppliers conspired to overcharge Petrobras for major projects, funneling some of the illicit profit to former Petrobras executives and politicians in the form of bribes and illegal political donations.

Petrobras has portrayed itself as a victim of the graft and says it has cooperated with authorities. Still, the company struggled to calculate the scheme’s impact on its balance sheet, leading auditor PricewaterhouseCoopers to refuse to sign off on its statements since the third quarter of 2014.

“With the publication of audited 2014 results, Petrobras has cleared a significant obstacle, after a collective effort, that shows our ability to overcome challenges in an adverse environment,” Chief Executive Aldemir Bendine said in a statement.

The financials come just days before an April 30 deadline in Petrobras’s bond covenants that could have allowed the holders of billions of dollars of Petrobras debt to demand early repayment.

Expectations that Petrobras would manage to publish audited earnings before the deadline caused the company’s shares to rally more than 40% over the past month. But experts say Petrobras must clear a series of remaining hurdles if it hopes to regain investors’ confidence.

The world’s most indebted oil major, Petrobras now faces the challenge of paying down more than 282 billion reais in net debt at a time when oil prices are nearly 50% below year-ago levels. To shore up its balance sheet, Petrobras said in March that it plans to sell an estimated $13.7 billion of assets in the next two years.

More broadly, investors say the company needs to improve its governance. The Brazilian government nominates most of Petrobras’s board, including its chairman, and has forced the company to burn through cash by subsidizing fuel prices in recent years while simultaneously executing a massive investment plan.

Also on Wednesday, a federal judge found Petrobras’s former downstream director, Paulo Roberto Costa, guilty of money laundering and criminal conspiracy, along with several other suspected members of the corruption ring. Mr. Costa, who admitted to accepting bribes as part of a plea deal with prosecutors last year, is facing additional charges of corruption.

Write to Paul Kiernan at paul.kiernan@wsj.com