Brazilian state-controlled oil company Petrobras reported its largest quarterly earnings in two years as crude prices rose and the government allowed it to sell fuel at a profit in the domestic market. Petrobras posted a 4.5 billion reais net profit (US$ 1.4bn) in the January to March period, reversing a 1.25 billion reais loss (US$ 400 million) in the first three months of 2016.
The world's most indebted oil company, Petrobras has benefited in recent quarters from a hands-off approach by the Brazilian government regarding fuel prices, which it has been forced to subsidize at times.
A 59% rise in Brent crude prices, to an average of U$53 a barrel, enabled Petrobras' upstream division to turn a profit in the first quarter after it lost money a year earlier. As a result, the company continued chipping away at its mountain of outstanding loans. Petrobras' total debt finished the first quarter at US$115.12 billion, down from US$118.37 billion at the end of 2016.
With such a large debt load, the company spent about half as much on interest in the first quarter as it did on capital investments. To reduce that burden, Petrobras executives aim to raise about US$21 billion via asset sales and partnerships this year and next. But Brazil's nationalistic unions have managed to slow that process down in the courts, and the company didn't secure any new transactions in the first quarter.
Petrobras' adjusted earnings before interest, taxes, depreciation and amortization, or Ebtida, rose 19% in the first quarter from a year earlier to 25.25 billion reais, while revenue fell 2.8% to 68.37 billion reais.
In related news Petrobras reported that tax court CARF has made a final ruling in favor of the company in a case regarding a deduction of 5.8 billion reais (US$1.8 billion) related to 2009 drilling expenses.