After four years of losses, Petrobras returns to profit


After four consecutive years of loss, the state company reported a net profit of R $ 25.8 billion in 2018, the highest in seven years and the first since corruption schemes in the state became the target of Operation Lava-Jato. In announcing its results on Wednesday, the state company attributed the return of its annual accounts to the blue to the improvement of its operating and financial results. Even so, legal and accounting contingencies in the last quarter frustrated analysts’ expectations.

Between 2014 and 2017, Petrobras accumulated more than R $ 70 billion in losses, which reflected losses with acts of corruption and with the devaluation of oil in the international market. In the presentation text of the 2018 results, Petrobras president Roberto Castello Branco – who took over last month – made mention of the “end of a painful cycle” in which “the company was the victim of prolonged looting perpetrated by a criminal organization” . He cited as symbolic the signing of agreements with US authorities on corruption practices and the recent sale of the Pasadena refinery, “whose acquisition had become a symbol of corruption in Brazil,” he said.

Oil and natural gas production, however, fell 5% last year to 2.62 million barrels a day. The shutdown of several maintenance platforms and the delay in the start-up of new systems were the main causes. But Petrobras expects to reach an average production of 2.8 million barrels per day this year. Sales revenue totaled R $ 349.8 billion in 2018, an increase of 23% compared to 2017. The company attributed this to the growth in the prices of derivatives in the domestic market, mainly diesel and gasoline.

In the fourth quarter of 2018, Petrobras had a net income of R $ 2.1 billion, against a loss of R $ 5.47 billion in the same period of 2017. But banks and brokerage firms projected something between R $ 3.2 billion and R $ 8 billion. The figure was 68% below the R $ 6.64 billion in the third quarter.

The frustration is linked to the fact that the balance sheet disclosed yesterday absorbed a negative impact of R $ 5 billion in judicial contingencies in the last three months of the year. Much of the value is due to the unification of producing fields in the Parque das Baleias, in the Campos Basin, which are on the Espírito Santo coast. After almost five years of discussion with the National Petroleum Agency (ANP), Petrobras agreed to pay R $ 3.1 billion in special participations.

It also weighed the provision for arbitration proceedings filed by the American company Vantage Deepwater because of a drilling contract terminated in 2015. Weighed still R $ 6.4 billion in write-downs (revaluation of the real value of the company’s equity) related to assets such as fields of Transpetro.

In 2018 as a whole, accounting losses totaled R $ 7.6 billion, while losses with legal contingencies were R $ 7.4 billion. The exchange rate effect was negative, at R $ 1.64 billion. Some of these losses were mitigated by non-recurring factors, such as the signing of agreements with the electric sector (R $ 5.26 billion).

Petrobras estimates net income would be $ 35.9 billion without these “special items.” Still, analysts estimate that operating indicators have progressed.

– The numbers indicate that the company follows the trend of return after being abandoned in a cycle of great inefficiency. Operational issues have improved, such as lower extraction costs and control of financial leverage, said Volpi Netto, a partner at Eleven Financial Research.

Board approves dividends to shareholders

Following the release of the annual result on Wednesday, Petrobras’ Board approved the payment of dividends to shareholders. The holders of preferred shares will receive R $ 106.6 million, corresponding to R $ 0.019043 per preferred share based on the annual result for 2018. Petrobras’ Board of Directors approved the distribution of a total of R $ 7.1 billion to shareholders for the year 2018.

One of Petrobras’ main problems, net debt closed 2018 at R $ 268.8 billion, against R $ 291.8 billion at the end of the third quarter. As a result, the ratio of debt to cash generation decreased from 2.96 times to 2.34 times. At the height of the Lava-Jato, this relationship surpassed 5 times.

“We can consider this question, for the time being, settled. The company should seek to keep leverage at this level. Since it is very capital intensive, it should not reduce this value much more, otherwise it will have difficulties to operate – added Volpi Netto

Castello Branco has a cost reduction plan to help improve the company’s financial health. On Tuesday, Petrobras announced that it will open a new program of voluntary dismissal, two years after the last initiative in that direction. The state-owned company also confirmed that the seven floors leased by Petrobras, on Avenida Paulista, one of the most valued addresses in São Paulo, will be vacated by June. The president of the company also announced that it will close overseas offices, among them those of New York (USA), Iran and Japan.

Castello Branco promises to accelerate the asset sales program, including the sale later this year of a refinery. In all, the company’s goal is to earn $ 26.9 billion in revenue from the sale of assets in the period 2019-2023.

Source: O Globo

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