Petrobras still going strong but 2012 low profits and high debt pound on prospects
Brazil’s government managed oil and gas corporation Petrobras posted a net benefit of 21.182 billion Reais (approx 10.6bn dollars) in 2012, which is 36% below 2011, reported the company in a filing, but in the fourth quarter profits totalled 7.747bn Reais (approx 3.9bn dollars) 53% higher than in the same period in 2011.
Petrobras attributed the poor performance of last year, the worst since 2004, to the depreciation of the Real against the US dollar, the increase in operational costs and the need to import refined products at expensive prices to provide demand. However, the upturn of the last quarter indicates a better financial performance and with fiscal operations.
In a note accompanying results, Foster said management knows the company's operational problems, is working to fix them, and believes Petrobras has good medium and long-term prospects. Output in 2013, though, will remain at 2012 levels, she said.
“Despite of last year, I’m convinced of the excellent prospects for the company in the mid and long term”, said Petrobras CEO Maria das Graças Foster in the release.
Profits before taxes, depreciation and amortization, (EBITDA) was down 12% last year and stood at 53.439 million Reais (approx 26.8bn dollars) Petrobras said debt also rose to 2.77 times earnings before EBITDA. That's above the company's own limit of 2.5 times EBITDA.
All of the fourth-quarter profit increase can be attributed to a 2.64-billion Reais sale of Brazilian government Treasury bonds and a two-thirds decline in income and social security taxes, according to the company's income statement.
Petrobras in the release underlined that the corporation complied with its oil and gas production targets with an average of 2.598 million barrels equivalent per day, of which 1.980 million from Brazil, similar to the 2011 average.
The volume of refined products was 1.997 million bpd, up 5% while sales were higher, 2.285 million bpd, because of the sustained demand for gasoline in Brazil which also helps to explain the surge in imports.
Unable to meet demand for fuels from 12 refineries in Brazil, the company, Brazil's only refiner, had to raise imports. Fuel imports jumped 28% in the quarter compared to a year earlier. Because world fuel prices were higher than those in Brazil, it sold that fuel in Brazil at a loss.
Net fuel and oil imports rose 90% in the period and refining losses jumped to 5.65 billion Reais in the quarter bringing total annual refining unit losses to 22.9 billion Reais, an amount larger than the company's entire annual profit.
Rising costs prevented Petrobras from taking advantage of soaring Brazilian fuels demand and the government's approval of gasoline and diesel-fuel price increases in June and July.
Net sales, or sales minus sales taxes, rose to 73.4 billion Reais, a 12.5% increase compared with the fourth quarter of 2011. Some of that gap was closed with June –July fuel price increase plus an additional in January. However it is still lagging.
Investments totalled 84.2bn Reais (approx 42.2bn dollars) mainly in exploration and production (51%) and provision network (34%).
Proven reserves of Petrobras climbed to 16.44 billion barrels of crude equivalent, while the company’s business planning for this year anticipates investments of 97.76bn Reais (approx 49bn dollars).
Preferred shares fell on Tuesday after earnings fanned concerns over management's ability to turn around the performance of the corporation. Common shares took their biggest plunge in more than seven months following the earnings release.
While holders of both preferred and common stock have received equal dividend payments per share in recent years, Petrobras said it would now pay 0.47 Reais in dividends per common share and 0.96 Reais per preferred share.