Petroleo Brasileiro S.A. - Petrobras (PBR)

[eastunder]

Petrobras CFO: Oil surge may lose steam

Brazilian state-run oil giant posts double-digit rise in quarterly profit

http://www.marketwatch.com/story/oil-prices-poised-to-drop-petrobras-cfo-2011-02-25?siteid=yhoof

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — International oil prices could drop as far as $70 a barrel when the North African region and the Middle East see a calming of the civil unrest that has disrupted oil production in Libya, the chief financial officer of Brazilian oil giant Petroleo Brasileiro SA said Friday.

The front-month crude contract earlier this week breached the $100-a-barrel mark for the first time since late 2008 as oil output from Libya dropped amid violent anti-government protests and as investors worried about possible supply disruptions in other North African nations and the Middle East.

“I don’t see the case that is happening in North Africa as an extended situation,” said Petrobras’s Almir Barbassa in a telephone interview with MarketWatch following the release of the company’s report of a nearly 40% rise in fourth-quarter profit.

Petrobras (BOLSA:BR:PETR4) (NYSE:PBR) is one of the world’s largest energy companies and one of the largest companies in South America. Petrobras is aiming to become one of the world’s top oil producers and exporters through the development of its massive reserves off the coast of Brazil.


Almir Barbassa, the chief financial officer of Petroleo Brasileiro SA, the state-run oil company.

“After everything comes to their proper place, oil prices will come down to below $100 ... to between $70 to $90 in the short- to medium-time.”

The light crude continuous contract last traded in the high $70-a-barrel range in late September.

Oil prices climbed 14% this week, the biggest weekly percentage gain since January 2009. Light, sweet crude for April delivery (NEW:CLJ11) on Friday closed up 0.6% to $97.88 a barrel on the New York Mercantile Exchange, but had eased during the session following reports that Saudi Arabia had increased its output by 8% to help offset the decline in Libyan output.

Libya sits on the largest oil reserves in North Africa, and output has dropped since the acceleration of protests seeking to oust Moammar Gadhafi after 42 years in power. Italy’s Eni SpA (NYSE:E) , the largest foreign oil producer in Libya, has suspended some of its oil and gas activities there. Other companies that have suspended or reduced activity in Libya include BP PLC (NYSE:BP) , Canada’s Suncor Energy Inc. (NYSE:SU) Norway’s StatoilHydro ASA (NYSE:STO) and OMV AG (PINK:OMVKY) of Austria.

Libya is the latest flashpoint in a wave of antigovernment protests that has swept through the Middle East and North Africa since December. An uprising in Tunisia resulted in the January resignation of President Zine El Abidine Ben Ali, and protests in Egypt led to the resignation Hosni Mubarak as president earlier this month. Protests have also taken broken in Bahrain, Djibouti, Iraq, Iran, Jordan, Morocco and Yemen.

Brazil isn’t in a position to help make up for Libyan-related oil shortages, said Barbassa.

“We are producing as much as we can, and, of course we plan to increase production as we did last year … but we don’t have spare capacity in terms of well-connection and drill-connection to our production facility to turn on the valve and start flowing oil,” he said. “Of course, a little bit more could be done, but not in volume that could make any difference to the world’s demand.”

Barbassa also he doesn’t expect production facilities in Libya to have sustained much damage. If they did, he said, it could keep oil above $100 a barrel. But “even with some damage, it can be repaired very shortly,” he said.

Petrobras this week pulled four of its employees out of Libya’s capital city of Tripoli and said that it was monitoring the situation of its nearly 15 workers that remained in the country.

Petrobras has been in Libya since 2005, according to its Web site. The company has exploratory oil and gas rights, and shared production rights, in an area in the northeastern portion of the Libyan coast. Petrobras operates a consortium that’s exploring the area and holds a 70% equity stake.

For its fourth quarter, Petrobras posted profit that surpassed analyst expectations. Earnings jumped 38% to 10.6 billion reals ($6.38 billion) from 7.66 billion reals from the year-ago period, helped in part by higher oil prices. Analysts polled by Dow Jones Newswires had expected the company to report net earnings of 9.2 billion reals.

Revenue for the period rose 14% to 54.59 billion reals from 47.69 billion reals in the same quarter last year. Earnings before interest, taxes, depreciation and amortization came in at 14.58 billion reals, up from 14.32 billion reals.

Barbassa said the company has raised its oil production target by about 5% to 2.1 million barrels a day for 2011, and that it plans to start production on 60 new offshore wells this year. Twenty of those wells will be in the potentially lucrative pre-salt region in the Santos Basin. The deepwater area runs roughly 500 miles along the country’s Atlantic coastline.

Last year, Petrobras conducted the largest sale of shares on record, raising roughly $70 million as part of its plan to raise funds for its $224 billion investment program that runs through 2014.

Petrobras still plans to raise $46 billion via the debt market up through 2014, said Barbassa. He said $29 billion will be for funds to pay maturing debt, and $17 billion is “new money.”

But Petrobras is “very comfortable,” stressed Barbassa, citing cash reserves of 55 billion reals ($33.08 billion) at the end of 2010. “Our net debt will be paid with one year of EBITDA. So we have room to get more money from debt issuance.”

Preferred shares of Petrobras closed Friday’s session up 0.8% ahead of the financial results. The shares are up nearly 5% so far this year.