Petrobras Sees Worst Quarter in 13 Years
By Andrew Willis, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Petrobras, Brazil’s semi-public oil producer, suffered losses of R$1.35 billion (US$665 million) in the second semester of this year, making it the company’s worst three months since 1999. In a statement released to press on Friday, August 3rd, the firm said the loss was largely due to a fall in strength of the Brazilian Real, increasing the size of dollarized debts and costs.
Other factors listed as being behind the poor result include a larger percentage of imported oil in the company’s overall sales volume, as well as extraordinary costs linked to the recent drilling of dry or uncommercial wells.
Analysts also acknowledged that the government’s unofficial policy of subsidizing petroleum prices in Brazil is electorally popular but costly for Petrobras.
“Damage is caused by the importation of petroleum products at a higher cost than their resale price in the domestic market,” Adriana Gonçalves da Silva, assistant director at the Brazilian Centre for Infrastructure (Centro Brasileiro de Infra Estrutura), a Rio-based consultancy, told The Rio Times.
“The perception of political interference has gone up since the company’s capitalization in 2010,” da Silva added.
The quarterly result was significantly below market expectations and contrasts with a profit of R$10.94 billion during the same quarter last year. It also comes amid other mixed news at the Rio de Janeiro-based multinational corporation, the largest in Latin America by market capitalization.
On the positive side, investors were buoyed by an announcement earlier on Friday that Petrobras had successfully located “good quality” oil at a well to the south of the Sapinhoa field, helping to lift the company’s share price. The field is located in deep waters of the Santos Basin, off the Southeastern Brazilian coast.
However on July 30th Petrobras announced that domestic crude oil output for the month of June had slipped 1.5 per cent to an average 1.96 million barrels a day, blamed on planned maintenance work at several offshore platforms.
The past decade has seen a repeated failure by Petrobas to meet production targets, prompting the company’s new president, Maria das Graças Silva Foster, to announce more conservative forecasts in June. Analysts now expect the company’s oil production levels to rise sometime after 2014.
Brazil’s richest man, Eike Batista, has also had to recently rethink production output, with dramatic results. His oil company, OGX, lost forty percent of its value in two days in late June, the biggest drop in the history of Sao Paulo’s stock exchange, after it announced that wells would be producing far less than previously promised.
Controversial ‘local content’ legislation that requires oil companies in Brazil to purchase goods and services domestically is frequently cited as one reason behind lagging oil outputs.
While both Foster and Batista publicly support the rules, a study by Booz & Co., prepared for Brazil’s National Petroleum Industry Organization, found that Brazilian companies in the oil services industry charge an average 55 percent more than their international competitors.
Many Brazilians however support the measures that are designed to stimulate the country’s struggling industrial sector and boost jobs.
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