Petroleo Brasileiro S.A. - Petrobras (PBR)

[eastunder]

Petrobras Q4 profit climbs 31 pct, capex 26 pct
Fri Mar 19, 2010 8:13pm EDTStocks

http://www.reuters.com/article/idAFN1915938220100320?rpc=44

Petroleo Brasileiro S.A. - Petrobras

* Petrobras plans to raise investments as much as 26 pct

* Net income rises 31 pct in year-on-year basis

* Profit beats 7.43 bln reais net estimate in poll (Recasts to give details on results, company comments)

By Guillermo Parra-Bernal and Denise Luna

RIO DE JANEIRO, March 19 (Reuters) - Brazil's Petrobras (PETR4.SA), which on Friday said fourth-quarter profit jumped by a third, boosted its four-year investment plan by 26 percent, hopeful of firming oil prices and congressional approval of a plan to replenish capital.

Rio de Janeiro-based state-run oil company raised its capital expenditures program for the 2010-2014 period to $200 billion to $220 billion from $174.4 billion in the 2009-2013, a jump of up to 26 percent, said Chief Financial Officer Almir Barbassa. The plan will still need to be put before shareholders for a vote on April 22.

He said the capex plan depended on rising Brent oil prices and also assumed that Congress would approve a government bill to inject $40 billion to $60 billion in the company's capital to undertake exploration projects in the oil-rich subsalt region.

"We expect (the capitalization) to take place by the end of July" this year, Barbassa told reporters in Rio.

Most investors are watching developments in the proposed capitalization, which could hurt minority shareholders as the government hopes to increase its stake in the oil giant.

Petrobras reported that fourth-quarter net income surged 31 percent, beating analysts' estimates, as the company pared back costs and expenses amid declining revenue.

Profit was 8.13 billion reais ($4.5 billion), compared with 6.13 billion reais reais in the same period of 2008. That was above the average profit predicted by seven analysts polled by Reuters, 7.43 billion reais.

Shares of the company have underperformed benchmark indexes over the past eight months, also on concern that the subsalt plan could overstretch Petrobras and lead to deteriorating credit quality.

"The increase in the capex plan isn't too ambitious, but its reach will depend upon congressional action on the capitalization," said Marcio Macedo, who oversees 53 million reais in equities for Sao Paulo-based Humaita Investimentos.

Under the plan, part of President Luiz Inacio Lula da Silva's proposed overhaul of oil laws being debated in Congress, the government would receive company shares in exchange for unexplored oil blocks believed to hold 5 billion barrels [ID:nN15306577].

Preferred shares of Petrobras tumbled 2.1 percent to 36.23 reais on Friday, paring 12-month gains to 29 percent. In the same period, the benchmark Bovespa stock index of Sao Paulo .BVSP has gained about 73 percent.

COSTS, EXPENSES FALL

Analysts including Paula Koversky at Itau Securities are expecting the capitalization to be concluded during the third quarter, as the country prepares to vote for a new president in October. The heavy political calendar coupled with the soccer World Cup in June will make it challenging for the government to pass the plan against significant opposition.

Humaita's Macedo said the capitalization plan could be distracting management as they struggle to boost production while keeping on top of various non-core sectors the company is obliged to participate in under government control.

Still, earnings showed a gradual recovery in operations even as demand for oil and refined products remained sluggish.

A volatile oil market, marked by the impact of the worst global recession since the 1930s, and a stronger currency in a year-on-year basis pushed Chief Executive Jose Sergio Gabrielli to rein in administrative expenses and cut the cost of building up inventory.

Costs dropped 21 percent, faster than the 8.7 percent decline in revenues, the filing said. Costs fell to 29.6 billion reais, while expenses tumbled 24 percent to 7.35 billion reais.

Net revenue fell to 47.6 billion reais from a year earlier, reflecting lower local prices for refined products that make up about half of Petrobras's sales. The seven analysts expected net revenue of 48.9 billion reais.

Earnings before interest, tax, depreciation and amortization, a gauge of cash generation and operational profitability known as EBITDA, surged 63 percent to 15.02 billion reais from 9.22 billion reais a year earlier.

Ebitda was in line with estimates of 15.01 billion reais in the Reuters poll.

Total 2009 profit fell to 28.98 billion reais from 32.99 billion reais in 2008.

The company also said that 2010 production estimates were lowered to 2.1 million barrels per day from a previous forecast of 2.25 million bpd. Petrobras also said it missed its goal of producing 2.05 million bpd in 2009, without elaborating