Petrobras Profits Fall 28% in Q1

Brazil's federal energy company Petrobras posted net profits of 3.97bn reais (US$1.27bn) in the first quarter of 2004, 28% less than the 5.54bn reais posted in 1Q03, the company said in a statement Thursday.

The decline resulted from a 36% fall in exploration and production net profits, a 29% fall in refining net profits and higher financial expenses. Domestic oil and gas production fell to 1.48 million barrels of oil a day (mb/d), down 6% from 1Q03, mainly due to the maintenance stoppage of the offshore Jubarte field. "The reduction in production increased our refining and lifting costs," CFO José Gabrielli said in a conference call with analysts.

Petrobras's lifting costs rose to US$4.22 a barrel from US$2.85/b as result of a fall in production and high costs of services, such as personnel and leasing of production equipment, he said. The cost of oil production will be reduced only in 2005 as the company kicks off commercial operations of new platforms that will add an extra 640,000 barrels a day (b/d) to its current production by December 2005. Production will increase with the start of commercial operations of Marlim Sul in June 2004 with an extra 100,000b/d capacity, the P-43 platform in October 2004 with 150,000b/d, the P-48 in December 2004 with 150,000b/d in, the P-34 platform by end-2004 and the P-50 platform by mid-2005 with an extra 180,000b/d capacity, Gabrielli said.

Gabrielli reaffirmed refining sector investments of US$1bn through 2007 to increase processing capacity by 200,000b/d from current 1.68mb/d. First quarter profits from refining and wholesale oil derivative sales fell 29% from the same period 2003 to 1.04bn reais. Lower diesel and gasoline prices, as well as a 3% decline in domestic oil derivatives sales, led to the decline.

Additionally, Petrobras raised imports of crude oil to compensate for the decline in production and to keep fuel stocks from falling, Gabrielli said.

Petrobras' gas and power operations, which include power generation and gas transport, posted net losses of 39mn reais in1Q04, down from 335mn reais in 1Q03. The improvement was a result of provisioning made in 2003, a 46% increase in the transport of gas in Brazil and a 122% increase in power sales due to economic recovery.

Overall, Petrobras's gross revenue fell to 32.7bn reais in the period from 33.4bn reais a year ago. Financial expenses rose to 1.07bn reais in Q1 from 640mn reais in the same period of 2003. The company's direct investments in 1Q04 were 3.52bn reais, of which 2.11bn reais went on E&P. Petrobras also invested 724mn reais in refining and production of oil derivatives, 486mn reais in international operations, 58mn reais in gas and power and 68mn reais in its fuels retail operations.

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