Brazilian state oil company Petrobras said yesterday fourth-quarter profit fell 36 percent, hit by higher production costs that its chief executive said were worrisome.
Petroleo Brasileiro SA said net consolidated profit totalled 5.2 billion reais (US$2.46 billion), down from 8.1 billion reais a year earlier. The result was below market expectations. Earnings before interest, taxes, depreciation and amortization (EBITDA) fell to 10.6 billion reais from 12.5 billion reais. Analysts, on average, had expected Brazil's industrial flagship to post net consolidated profit of about 6.2 billion reais and EBITDA ÃÂ¢€" a key measure of cash flow ÃÂ¢€" of 12.6 billion reais. Net revenue in the fourth quarter was 41.04 billion reais, compared with 38.6 billion in the same quarter a year earlier. Petrobras said refining costs rose 28 percent per barrel in the fourth quarter from the same quarter a year earlier and that extraction costs, excluding government participation, rose 13 percent. Planned stoppages at some refineries also contributed to costs as Petrobras imported more oil derivatives. "One of the worries of management is costs, as both operating costs and investments have systematically been affected by generally higher prices in the oil sector," Petrobras Chief Executive Jose Sergio Gabrielli said at a media conference. "For sure the price of oil and the returns it generates for companies compensate for this increase in costs; however, management is always monitoring them," he said. Petrobras shares were 0.4 percent higher at 44.4 reais in afternoon trading, as international oil prices rose slightly, but the stock lagged behind the broader market's 1.6 percent rise. "(The result) was worse than expected. Costs have been disappointing for some time already ... this is reflected in the stock price," said Luiz Otavio Broad, an analyst with brokerage Agora Senior. Despite the higher costs, for all of 2006 consolidated profit was a record 25.9 billion reais, helped by a near 6 percent rise in domestic oil output to an average of 1.78 million barrels per day. In the previous year, Petrobras earned 23.7 billion reais. It wants to boost output to 1.9 million bpd by the end of this year after the launch of several new rigs.