17/10 / 2016 ABEGAS Redacao Notícias
The creation of a new derivative pricing policy is an important step for Petrobras to overcome an obstacle that many considered insurmountable in the asset sales strategy implemented by the company: the aim of finding partners for the refining area. The strategy, unveiled at the company’s Business Plan presentation released on September 20, found a basic obstacle, since the company owns all the major refineries in the country, the downstream sector is by definition operated with low profit margins and there is a recent history of selling fuel below international prices.
Since he took over, the current PBR president, Pedro Parente, repeats the mantra that the setting of prices charged by the company shall be responsible only by directors and key executives of the oil company. This condition was crucial for him to accept the post of chief executive of the company.
In the decision announced last Friday reducing the price of diesel by 2.7% and gasoline by 3.2%, the company set a pricing policy based on international parity, with the inclusion of transport costs and a margin to compensate the risks of the operation, such as exchange rate volatility.
The announcement was a cornerstone needed by the market to accept definitively the company’s independence to set the prices of the main products it sells. And now opens the possibility of attracting partners for the refining area.
“Even with the loss of EBITDA in the short term, the disclosure of a formula is positive for Petrobras,” say analysts Luiz Carvalho and Julia Ozenda of UBS. Falling fuel prices should have a negative impact of $ 300 million in EBITDA for the fourth quarter, according to the bank.
For the Eurasia Group consultancy, a more transparent policy will gain more credibility and make the refinery assets more attractive. “A more transparent price policy can facilitate the strategy to attract partners for the purchase of its assets in the refinery sector. In its latest business plan, the company increased the divestments target from U$ 15 billion to U$ 19 billion in two years. ”
In September, refining and natural gas director, Jorge Celestino, said that the disinvestment program and business partnerships for the 2017/2021 period included the refining assets. The model has been analyzed by the company, but without a definition so far.
The new pricing policy can “undoubtedly will attract investors” to Petrobras’ refining area, says Helder Queiroz, professor of the University of Rio de Janeiro (GEE / UFRJ) and former director of the National Agency petroleum (ANP).
The measure also ensures that the company will not suffer further losses related to the lag in fuel prices. ” It was the lack of policy, largely responsible for the massive destruction of value in the past, with long periods with prices below par which caused significant cash burn for the company,” say analysts Rodolfo Angele and Felipe dos Santos, JP Morgan said in a report.
In addition to the benefits for the refinery segment, the company’s announcement is considered an important step towards increasing the company’s governance. It is a sign of less concern about the company’s financial situation, according to Eurasia.
The parity depends on the international price, but also the exchange rate, explains Queiroz, and Petrobras has not released a parametric formula to clarify the way in which, for example, the company came to the diesel reduction values and gasoline. He praises the predictability that the new pricing rules can bring to market.
The market reacted positively to the announcement. Petrobras shares closed up the Friday.
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