Brazil's Petrobras reported second-quarter profit that fell by nearly a third from a year earlier, missing expectations as oil prices fell and it took charges for layoffs and the impairment of a refinery. Petrobras said net income fell 30% to 370 million Reais (US$118 million) in the three months ended June 30 compared with a profit of 531 million Reais a year earlier.
Last year's profit was one of the most anemic quarterly results in the company's recent history. The second-quarter 2016 profit comes after a 1.25 billion Reais loss in the first quarter of this year.
Part of the problem for analysts trying to chart the company's progress is Petrobras' huge debt, Chief Financial Officer Ivan Monteiro told reporters on Thursday. This requires the company to make quick changes to preserve enough cash to pay its obligations.
While total debt has eased 2% since the end of 2015, at US$124 billion it is still the largest in the oil industry.
From our point of view the company is becoming more predictable, Monteiro said. Clearly we're still facing difficulty because the company's debt level is still very high ... still at a level where we are required to maintain a very high level of liquidity.
After a 26% decline in the average price of benchmark Brent crude oil LCOc1 compared with a year earlier, Petrobras net sales, or total sales minus sales taxes fell 11% from a year earlier to 71.3 billion Reais.
The 1.21 billion Real cost of a voluntary dismissal program and 1.12 billion Real impairment charges for the Comperj refinery, whose construction was halted last year after eating up US$13.5 billion of investment, kept costs high even as revenue fell.
As a result, operating profit fell 25% to 7.18 billion Reais. If a scaled back Comperj opens as now planned in 2023, it will be more than a decade late and nearly triple its original US$5.2 billion budget.
Contract fixing, bribery and political kickbacks from the refinery are part of a giant corruption scandal that implicated, and resulted in jail terms for a number of its former senior executives and contractors.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, a measure of a company's ability to generate cash from operations, was little changed rising 2.8% to 20.3 billion Reais.
In related news Petrobras reported that oil production in Brazil fell to 2.2 million barrels per day in July, a 0.36% drop from June. The company produced a total of 2.89 million barrels of oil equivalent (boe) in July from its activities in Brazil and abroad, slightly below the 2.9 million boe produced in June.