Bloomberg News

Petrobras Profit to Be Curbed by Weaker Real, CFO Says

May 22, 2012

Petroleo Brasileiro SA (PETR4), the state- controlled oil producer, said a weaker local currency is hurting profit as the value of the company’s dollar-denominated debt increases.

The effects on Petrobras’s balance sheet of the Brazilian real’s 17 percent decline in the past three months to a three- year low may also affect dividend payments, Chief Financial Officer Almir Barbassa said in an interview at the Rio Investors Day today.

“We finance ourselves from the international capital market so our exposure to the dollar is high,” Barbassa said. “We have to recognize the loss. This is going to have an impact on the dividends to be paid.”

The currency fell to a three-year low yesterday and was the biggest loser against the dollar among the 16 most-traded counterparts tracked by Bloomberg. Petrobras has 76 billion reais ($37.09 billion) in debt and assets abroad that are exposed to currency fluctuations, Barbassa said.

Brazil’s real was down 0.25 percent to 2.0470 per U.S. dollar at 2 p.m. after declining earlier to 2.0635, the weakest level since May 2009.

Net income dropped 16 percent in the first quarter to 9.2 billion reais from 10.99 billion reais a year earlier, the company said May 16.

Petrobras slid 2.7 percent to 19.86 reais in Sao Paulo. The stock has fallen 7.5 percent this year, more than the 2.3 percent decline in Brazil’s benchmark Bovespa Index.

Asset Sales

Petrobras will decide which U.S. Gulf of Mexico assets it will sell and begin marketing them before year-end, Barbassa said. This is part of a plan to help finance investments in Brazil, where the company has made the largest oil discoveries on Earth in the past decade, he said.

Petrobras hasn’t yet decided if it will sell a portion of its U.S. assets as a group or individually, he said. Petrobras has stakes in 186 exploration blocks in the Gulf of Mexico and has had success exploring, he said.

“All the exploration and production assets are scarce right now,” Barbassa said. “Many companies are looking for good opportunities.”

Petrobras also wants to sell oil and natural-gas assets in Africa and Brazil. QGEP Participacoes SA (QGEP3), a Rio de Janeiro-based explorer that partners with Petrobras, plans to compete for any assets in Brazil the company will sell, Chief Exploration Officer Lincoln Guardado said in an interview today.

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


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