Petrobras Vows To 'Cut Cholesterol' After Third Quarterly Loss
(Bloomberg) -- Brazil’s state-controlled oil company Petrobras is advancing asset sales to reduce the biggest debt load in the oil industry after three quarters of straight losses.
Brazil’s deepest recession in a century is curbing lucrative fuel imports and eroding profit at Rio de Janeiro-based Petroleo Brasileiro SA. The company’s net loss was 1.25 billion reais ($360 million), or 0.10 centavos per share, in the first quarter compared with a profit of 5.3 billion reais, or 41 cents, a year earlier.
"Petrobras is a company with very high cholesterol levels, which is leverage," Chief Financial Officer Ivan Monteiro told reporters in Rio on Thursday. “We are working to cut cholesterol so that the company has a more healthy life.”
Petrobras is cutting spending and selling assets after crude prices tumbled and it found itself at the center of an expanding pay-to-play scandal that has seen some of Petrobras’s former executives sent to prison and suppliers go bankrupt. It is negotiating the sale of the natural gas distribution unit Nova Transportadora do Sudeste to Brookfield Asset Management Inc., it said Thursday, without providing a value. Earlier this month Petrobras agreed to sell assets in Argentina and Chile for about $1.4 billion.
“The market’s attention will be focused on the divestment plan,” Caio Carvalhal, an analyst with Brasil Plural SA, said by phone from Sao Paulo. “Petrobras needs to sell assets.”
Petrobras’s refining division, which drove profit in 2015 on lucrative imports of gasoline and diesel, became less profitable as Brazil’s deepest two-year recession on record eroded demand. Fuel imports slid 17 percent to 287,000 barrels a day from a year ago and domestic refinery output was flat, Petrobras said. Sales fell to 70.3 billion reais, down 5 percent from a year ago and less than the 78.8 billion-real average estimate of four analysts in a Bloomberg survey.
Domestic oil and natural gas production fell 7 percent from a year ago to to 2.44 million barrels a day because of increased planned maintenance at offshore facilities.
Collapsing crude prices have hurt Petrobras amid Brazil’s deepest recession on record. It was the worst-performing major oil stock last year, and has rebounded in 2016 ahead of President Dilma Rousseff’s temporary ouster on Thursday. Investors hope her administration will be replaced with one that is more favorable to the oil industry. The stock has climbed 46 percent this year, after tumbling 29 percent in the past 12 months.
“The expectation that Brazil’s economy will improve in general also helps Petrobras,” Carvalhal said.
Rousseff led a drive to increase buy-in-Brazil requirements in the oil industry and limited the role of foreign oil majors in developing the so-called pre-salt fields, the biggest group of offshore discoveries this century. Petrobras cut its proven reserves by 20 percent last year after lower oil prices made some of its fields uneconomical.
Petrobras reported 21.09 billion reais in first-quarter earnings before interest, taxes, depreciation, and amortization, or Ebitda. That exceeded the 20 billion-real average of three analysts’ estimates compiled by Bloomberg.
The company is marketing offshore oil and gas fields worth as much as $2 billion as part of its plan to sell assets and pay down debt, two people familiar with the matter said earlier this year. Petrobras aims to raise $15.1 billion from a two-year divestment program is started in 2015.
Petrobras has been turning to alternatives outside the bond market to raise cash at a time the oil rout and corruption probe have lifted borrowing costs. In February, Petrobras secured a $10 billion loan from China Development Bank Corp. The depreciation of the local currency and expanding interest payments contributed to a financial loss of 8.69 billion reais, Petrobras said.
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