This might DPDW
Petrobras Second-Quarter Profit Beats Estimates as Costs Drop
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By Helder Marinho
Aug. 15 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, reported second-quarter profit fell less than analysts estimated as production costs declined.
Consolidated net income dropped to 7.73 billion reais ($4.19 billion), or 88 centavos a share, from 9.72 billion reais, or 1.11 reais, in the year-earlier period, the Rio de Janeiro-based company known as Petrobras said yesterday in a statement. Six analysts surveyed by Bloomberg had forecast an average profit of 6.23 billion reais.
Chief Executive Officer Jose Sergio Gabrielli is seeking to cut costs for equipment including rigs and metals by as much as 40 percent after oil prices more than halved from a record $147.27 a barrel in July 2008. The cost of goods sold fell about 28 percent to 24.6 billion reais in the quarter and Gabrielli said this year he wants to ”squeeze” suppliers.
“Petrobras’s result was better than the market expected because of lower costs and expenses,” said Luiz Broad, an analyst with Rio de Janeiro-based Agora Corretora. “This was a very good result.” Lower expenses may be related to the introduction of Petrobras cost-cutting programs, he said.
“Extraction” costs fell in Brazil, Chief Financial Officer Almir Barbassa told reporters in Rio de Janeiro Aug. 14, without providing more details.
Petrobras generates $500 million of additional cash a year for each $1 increase in a barrel of oil.
Investment Plan
Petrobras has a five-year $174.4 billion investment plan, the world’s largest corporate investment program. The increase in spending led Standard & Poor’s to cut the company’s credit rating to BBB-, the lowest investment- grade level, on June 10.
“That investment will lead necessarily to an increase of the company’s debt,” said Milena Zaniboni, an analyst for Standard & Poor’s in Sao Paulo, in a telephone interview Aug. 13. “The impact of the plan in Petrobras’ balance sheet will be significant. We are talking about almost $70 billion more than last year’s investment plan.”
Oil has fallen more than 50 percent since reaching last year’s highs. Crude oil for September delivery declined $3.01 to $67.51 a barrel at 2:50 p.m. on the New York Mercantile Exchange Aug. 14, the lowest settlement since July 30. Futures have risen 51 percent this year.
Counting on Discoveries
Petrobras is counting on discoveries to boost output by more than half to 3.66 million barrels a day by the end of 2013. The company faces a “hard task” in meeting its output goal of 2.05 million barrels of crude a day on average in Brazil this year, Gabrielli said Aug. 3.
Production averaged 1.958 million barrels daily in the first six months and will average between 2 million and 2.1 million barrels this year, Barbassa said yesterday.
Petrobras’ production forecast “is higher than what it will deliver,” Paula Kovarsky, an analyst at Itau Securities said before results were released. “Still, Petrobras has increased production by 6.7 percent year to date, which is much higher than the average for the sector.” She has a “sector perform” on the stock and doesn’t own any.
Petrobras wants Brazil’s government to extend the company’s role in the development of the so-called pre-salt region. President Luiz Inacio Lula da Silva’s government is drafting a bill to change regulations for the region after Petrobras announced the largest oil discovery in the Americas in the past three decades, the Tupi field.
Tupi Reserves
Tupi has estimated reserves of as much as 8 billion barrels of oil. About 62 percent of the region has yet to be opened up to exploration. Pre-salt crude is trapped under salt as much as 5,000 meters below the seabed.
“One thing is already decided: Petrobras will be the operator of all fields and have a 30 percent share of all consortiums,” Energy Minister Edison Lobao told reporters in Brasilia yesterday after a meeting with Lula da Silva.
Kovarsky said the possibility of making Petrobras the sole operator of the pre-salt blocks in exchange for a larger government stake could be a “trap.”
“Being the operator of the pre-salt will require substantial efforts and Petrobras may not have enough resources to develop the new areas and also the existing concessions, which seem to be more profitable under the current concession regime,” she said.
Net sales fell to 44.6 billion reais from 56 billion a year earlier.
To contact the reporter on this story: Helder Marinho in Rio de Janeiro at hmarinho@bloomberg.net
Last Updated: August 14, 2009 23:00 EDT
