By PETER MILLARD
Petrobras rebounded from the biggest slump in four months
after Brazils state-run crude producer forecast
increased oil exports and fuel output.
After posting an unexpected second-quarter profit decline on
higher fuel imports and lower oil exports, Petrobras said in
a presentation on Aug. 11 that sales to overseas markets
probably would surge 51% in the second half while refinery
production would rise 4%.
That signals a reduction in losses from selling imported fuel
at below global prices.
Theres a lot of new oil well have in the
coming weeks and months, Jose Formigli, who heads
exploration and production, said on Aug. 11 on a
conference call with analysts.
Petrobras, based in Rio de Janeiro, rallied 4.3% to close at
20.14 reais in Sao Paulo after tumbling 4.2% on Aug. 8.
Earnings of the biggest crude producer in ultra-deep waters
has disappointed analyst in three of the past four quarters.
Crude exports fell 14% in the second quarter from a year ago
while an increase in fuel output wasnt enough to
prevent a 56% surge in imports, which are sold at a loss
because of price caps. President Dilma Rousseffs
government, which controls Petrobras with a majority of
voting shares, has prevented the company from increasing
prices enough to erase import losses as it seeks to keep
inflation in check.
The fuel subsidy policies have weighed on the shares, which
have lost investors 37% in the past four years, making it the
worst performer of the 20 most valuable major oil producers,
according to data compiled by Bloomberg.
The companys fuel imports jumped to 407,000 bpd in the
quarter, from 261,000 a year earlier. Daily crude exports
fell to 308,000 bbl from 359,000.
In todays presentation, Petrobras said it expects crude
exports to average 250,000 bpd in the second half. Output at
the companys pre-salt fields reached a record 546,000
bbl on July 13.
Net income fell 20% to 4.96 billion reais ($2.2 billion), or
38 centavos a share, from 6.2 billion reais, or 48 centavos,
a year earlier. That trailed the 55-centavo average of 12
analysts estimates compiled by Bloomberg.
Brazils domestic pricing for gasoline and diesel,
which has ranged between 10% and 20% below international
pricing, depending on the exchange rate, puts a significant
drag on Petrobrass profitability, Moodys
Investors Service said in a July 29 research report.
The government probably wont authorize a fuel price
increase before elections in October, Eurasia Group said in a
Aug. 6 note to clients.
We are seeking convergence with international fuel
prices in Brazil to help meet the companys
internal financial targets, CEO Maria das Gracas Foster wrote
in the earnings report. I reassure investors and
stockholders that the increasing production of oil, natural
gas and derivatives, especially diesel and gasoline, is
already a reality on a daily basis.
Petrobras plans to boost domestic crude output 7.5% this year
as it connects wells to production equipment in deep waters
of the Atlantic. The companys domestic output rose 2%
in July from the prior month to 2.049 million bpd as it
increased production at two new platforms. This month it
surpassed 2,100 bpd as the company added wells to new
platforms, Formigli said.
A combination of equipment delivery delays, unplanned maintenance
at offshore platforms
and faster-than-expected declines at the companys
legacy fields in the Campos Basin has left production little
changed since 2010.
Analysts from Banco Santander SA and Banco Bradesco SA have
warned that the slower-than-forecast expansion
so far is putting this
years goal at risk even though new wells and production
vessels are expected to accelerate growth in the second half.
Investors arent counting on Petrobras meeting its
targets this year, Eric Conrads, who helps oversee $500
million in Latin American stocks as a money manager at ING
Groep NV, said.
The stock has gained 14% this year on speculation the
presidential elections in October will herald more
investor-friendly policies. It slumped Aug. 8 after a poll
showed Rousseff winning re-election in a possible runoff.
The shares traded at 10.7 times estimated profit on July 22,
the highest since November. The ratio is 9.9 on Aug. 11.
The continually weak results and balance sheet are not
being reflected in the stocks stretched valuation
multiples that show the stock trading at a premium to both
global peers as well as to the companys historical
averages, Banco Santander SA analysts Christian Audi
and Gustavo Allevato wrote in a note to clients dated on Aug.