Petrobras First-Quarter Profit Beats Estimates on Crude
May 16, 2011, 4:05 PM EDTBy Peter Millard
(Updates share price in fifth paragraph.)
May 16 (Bloomberg) -- Petroleo Brasileiro SA, the world’s fifth-largest oil company by market value, posted first-quarter profit that beat analyst estimates on higher prices and output.
Net income rose to 10.99 billion reais ($6.72 billion), or 84 centavos a share, from 7.73 billion reais, or 88 centavos, in the year earlier period, Rio de Janeiro-based Petrobras said May 13 in a regulatory filing. Sales gained about 9 percent to 54.8 billion reais. The company, which sold $70 billion of shares in September, was expected to post per share profit of 74 centavos, the median estimate of four analysts surveyed by Bloomberg News.
Oil and natural gas output gained 3 percent after the company added offshore production platforms in the Campos and Santos basins, while crude traded in New York climbed 20 percent in the quarter to average $94.60 a barrel. The company also posted a financial gain of about 2.7 billion reais, helped by the appreciation of the Brazilian real, which reduced the value of the company’s dollar-denominated debt. Per share profit dropped after the company sold new shares in September.
“The company is delivering what it promised in terms of growth,” Chief Financial Officer Almir Barbassa said today in Rio de Janeiro. Petrobras “is testing new fields, preparing for production growth that will come in the next few years.”
Shares Rise
Petrobras rose 43 centavos, or 1.8 percent, to 23.95 reais as of 3:52 p.m. in Sao Paulo, the biggest gain in a week. The shares have fallen 12 percent this year, compared with a 9.4 percent decline for the benchmark Bovespa stock index.
“The stock has underperformed the market, so it could bounce back,” Eric Conrads, who helps manage $12 billion in emerging-market stocks at ING Investment Management in New York, said in a May 13 telephone interview. “The stock has been deeply oversold relative to the Brazilian context.”
Petrobras is developing the offshore Lula field and may take a minimum stake of 30 percent in the government’s Libra discovery. Lula and Libra are the Americas’ biggest oil finds since Mexico’s Cantarell in 1976, and are located in a deep- water region known as the pre-salt along Brazil’s coast.
Petrobras has drilled eight pre-salt wells this year in the Santos Basin that holds the Lula and Libra fields as the company accelerates exploration after contracting more equipment, according to Barbassa. The company only drilled 20 pre-salt wells in Santos from 2006 through 2010, he said.
“That gives an idea of the rate of growth,” said Barbassa. Drilling “will accelerate even more,” he said.
The company will need to raise $17 billion of net debt in the next five years after selling $6 billion of debt in January and borrowing $1.5 billion to $2 billion from banks in the first quarter, he said.
Market Value
Petrobras, with a market value of about $201 billion, trails Exxon Mobil Corp., PetroChina Co., Royal Dutch Shell Plc and Chevron Corp. among the world’s largest oil producers by market value.
The Brazilian real has climbed 8.5 percent in the past year against the U.S. dollar, according to Bloomberg data, the second-best performer in Latin America after the Chilean peso.
“The real has strengthened and because a large part of Petrobras’s costs are dollar-based, when the dollar is weakening against the real the margins improve as a result,” Anisa Redman, an oil and natural gas analyst at HSBC Holdings Plc in New York, said in a telephone interview before the report. She rates the stock “overweight” and doesn’t own any.
Bond Sale
Petrobras continues to study a possible bond sale, depending on conditions in international markets, Barbassa said. The company doesn’t need to raise cash for investments after selling the $6 billion in bonds in the first quarter, he said.
“It depends on the opportunities,” Barbassa said of the potential sale. “We’re working in the best possible way to take advantage of good opportunities that arise in the market.”
Per-share profit dropped after the company sold $70 billion of new stock in September, the largest share sale in history. The company used the cash to finance its $224 billion five-year business plan and buy from the government the rights to produce 5 billion barrels of oil from deep water fields offshore.
Petrobras’s international division posted an 89 percent increase in profit in the quarter to 843 million reais. The company sells crude abroad at international prices, while its domestic production is refined in Brazil and sold at fixed prices under a government policy to control inflation.
Profit at the exploration and production business rose 28 percent to 9.33 billion reais, while earnings at the gas and energy unit increased 59 percent to 515 million reais.
Refining Losses
The company’s refining division posted a 95 million reais loss after the company sold imported gasoline and diesel below cost.
Lower ethanol prices should ease demand for gasoline and allow Petrobras to stop importing the fuel, Paulo Roberto Costa, the head of Petrobras’s refining division, told reporters today at a press conference in Rio de Janeiro.
“It is possible to supply the domestic market with our own production,” Costa said.
Petrobras will have fewer planned shutdowns at the country’s refineries this year compared with 2010, allowing it to increase overall production, Costa said. The company said May 13 that it will carry out additional studies for its 2010-2015 business plan after it was presented to the board.
--Editors: Dale Crofts, Jessica Brice
To contact the reporter on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net
To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net
