By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – What started out as a scheduled meeting by Petrobras officials to announce the company’s quarterly operational results turned into a teleconference to discuss the worst scandal ever faced by the oil giant and its impacts on the company and the market.

Petrobras President, Graça Foster, explains why the company delayed the release of third-quarter financial results, photo by Antonio Cruz, Agencia Brasil.
Petrobras President, Graça Foster, explains why the company delayed the release of third-quarter financial results, photo by Antonio Cruz, Agencia Brasil.

Instead of talking about record oil production numbers in October, Petrobras President, Maria das Graças Silva Foster, spent her time talking about why the third quarter financial results were not released and the measures implemented for better internal controls.

“Due to the current allegations and investigations due to the Lava Jato operation, the company is not ready to release accounting results for the third quarter of 2014, since these allegations, if confirmed, can impact the results,” said Foster.

The Lava Jato operation (Carwash) is the name given by federal police to the on-going investigations into a money-laundering scheme involving former and present Petrobras directors and employees, politicians and high-ranking executives from some of Brazil’s largest construction and engineering firms. On Friday, November 14th, warrants were issued for 36 people in connection to the scheme.

Foster went on to say that during the last year, seven special investigation commissions were created within the company with the objective of strengthening internal controls. According to the Petrobras president, the company also hired two law firms, one Brazilian and one American, to investigate the ‘nature, extension and impact of actions’ taken and confirmed by former Petrobras director Paulo Roberto Costa. Costa, who was arrested in March of 2014 accused of receiving bribes, entered a plea-bargaining agreement with prosecutors in September for a lighter sentence.

Paulo Roberto Costa, Petrobras director
Former Petrobras director, Paulo Roberto Costa accuses politicians of illegal kickback scheme, photo by Antonio Cruz/Agencia Brasil.

Foster also announced that high-ranking company officials proposed to the Petrobras Board of Directors the creation of a compliance department within the corporation. According to the official, Petrobras already has worldwide recognition for its technical excellence. “We want, need, and should have the same respect, the same recognition for our governance,” explained Foster.

At the end of the presentation Foster announced that the company’s petroleum production set a historic record in October with an average of 2.126 million barrels per day. The news, however, was largely ignored, with those attending the teleconference more interested in knowing how the scandal would affect the company’s results, shares and issuance capacity.

Almir Barbassa, Petrobras’ Financial and Investor Relations Director, admitted that without the release of the results and avow from the auditors, the company will be limited in its debt issuances in 2015. “We need a letter from auditors to conduct any debt issuances and without the conclusion of the revised report the auditors will not be prepared to give us the letter.”

When asked what accounting adjustments would be necessary for the third-quarter financial report to be released, Barbassa said that the company was analyzing the statements given by Costa. Based on Costa’s declaration, said the director, the company would adjust the value of the project or asset to the adequate and just price, without the additional ‘payment’.

The latest on developments of the Lava Jato scandal also produced a reaction from Brazil’s President Dilma Rousseff in Australia, where she was attending the G-20 summit over the weekend. “I think this could, in fact, change Brazil forever,” she told reporters after hearing of the latest arrests in the case.


  1. The Petrobras fiasco is obviously at the top of the agenda for doing business with Brazil as a whole. But signs are that there will be more transparency and the company’s financial position will be restored. Dilma Rousseff has to convince the markets that she is running a clean economy. Brazil would be much richer to better valuations of its assets if the country was run with greater transparency and accountability.


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