Petrobras posts biggest profit since 2011 as oil rebounds

[RIO DE JANEIRO] In a return to its glory days, Petrobras posted its biggest profit since 2011 as rising crude prices compensated for sales disruptions during a crippling trucker strike in May.

The oil market rebound helped make up for lower margins on refined products and lost sales during the 10-day strike. Profit reached 10.07 billion reais (S$3.7 billion) in the first quarterly results with Ivan Monteiro as chief executive officer. Petrobras also announced a payment of 0.05 real per share in interest on equity, citing its progress in cutting debt.

"Brent prices were considerably superior in 2011," Mr Monteiro said in Rio de Janeiro, citing the global benchmark for crude. At the same time, he said the profit was the "result of discipline' in spending.

Shares rose as much as 5.6 per cent in Sao Paulo after the open.

The most indebted publicly traded oil producer continued slashing its total debt, which fell to US$91.7 billion in the quarter and led to lower interest payments. Petroleo Brasileiro SA, as the Rio de Janeiro-based producer is formally known, has been selling assets, cutting costs and reducing staff in recent years to lower its leverage.

Petrobras used a US$53 Brent price for its 2018 business plan, which would lead to a debt-to-earnings ratio of 3.3 times. Going forward, Petrobras' sales volumes will benefit from the exodus of rival importers.

Petrobras already has a virtual monopoly in Brazilian oil refining and has regained dominance in fuel imports after the government fixed diesel prices in May after a crippling trucker strike. In the second quarter, Petrobras gained market share in both diesel and gasoline, helping lift sales volumes, the company said in a statement.

Competition from private importers is no longer economically viable since Brazil's government set diesel prices and introduced a reimbursement policy that other players have found difficult to navigate, according to Abicom, an association of fuel importers that includes Houston-based Tricon Energy Inc and London-based Greenergy International Ltd. Petrobras has also narrowed its gasoline margins at import hubs, further discouraging competition.

The company recognised 590 million reais in subsidies from the second quarter, and is still waiting for reimbursement from the government, Chief Financial Officer Rafael Grisola said at the same press conference where Mr Monteiro spoke.

"We're back to monopoly days," Abicom President Sergio Araujo said in an interview Wednesday. "Our operations are paralyzed; basically Petrobras is the one importing today."

Competition from third party importers is viewed by the company has healthy, Mr Monteiro said, pointing out that the fixed prices and reimbursements apply to all participants.

Sales rose in the second quarter to 84.4 billion reais, more than the 83.12 billion-real estimate of six analysts compiled by Bloomberg.

Along with a new CEO, Petrobras is also working with a new chief financial officer in Mr Grisolia. The earnings report could be the first of just two results they'll deliver to investors. While their mandates don't expire until next March, Brazil holds presidential elections in October and the new administration, which controls the company with a majority of the voting shares, can change management once it takes office on Jan. 1.

Mr Grisolia is a former Exxon representative in Brazil who had the same role at Petrobras' fuel unit BR Distribuidora.

BLOOMBERG