Petrobras Posts a Profit for Q4 2016


Petrobras made a net income for the fourth quarter of 2016 of R$2.5 billion. This happened after the company lost R$16.4 billion in the third quarter. Petrobras lost $14.8 billion in 2016. This was half the amount compared to 2015.

“Petrobras results in 2016 were marked by a significant improvement in its operational performance over the course of the year, reflected in a reversal from the loss posted in 3Q16 to a net profit of R$2.51 billion in 4Q16, and a reduction in indebtedness,” said the company in its press release.

As we reported previously, An injunction put a stop to Petroleo Brasileiro SA’s (Petrobras) fuel distribution unit. Interestingly, Petrobras workers requested the full stop. The sale is a part of its divestment program. It wants to reduce its debt by raising cash. Workers argued the company must make the sale a public process not a private one. Federal Judge Edmilson de Silva Pimenta agreed; however, Petrobras plans to appeal the decision. Petrobras needs the money.

The company was a lynchpin of the Brazilian economy. Now the company’s dire straits coupled with inflation has shaken Brazil to its core economically and financially. Inflation was an issue a year ago as well, “The scenario is very difficult, and I don’t see it improving in the short term,” said William Landers, who oversees $3.7 billion in Latin American stocks at BlackRock Inc. in New York. “We’re looking at a possibility of negative growth, shortages of electricity and water, bad prospects for infrastructure investment.” Bloomberg presented an image of a Brazil in crisis in 2015.

The publication said, “The case helps highlight perceptions of the impact of graft in Brazil. The country ranked 135th of 144 nations for diversion of public funds in the World Economic Forum’s 2014-2015 Global Competitiveness Report. While Petrobras shares have gained 22 percent in four days amid the management change, erasing losses for the year, the oil producer has lost almost two-thirds of its value since September. ‘It’s amazing; what destruction,’ Eric Conrads, a money manager at ING in New York who helps oversee about $500 million of Latin American stocks, said by telephone.

‘You have to inject new blood –- it’s necessary, but not sufficient to restore confidence in Brazil as well as in Petrobras.’ 343.9 billion reais, equal to 6.7 percent of gross domestic product, more than double a 3.25 percent deficit in 2013. The deterioration in fiscal accounts prompted Standard & Poor’s to cut Brazil’s credit rating last March to one level above junk.

‘The country was going very fast toward a cliff, and still is,’ Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said by telephone from Rio de Janeiro. ‘Pessimism still prevails. All you have to do is look at the prices. Petrobras is having a very significant, and very negative, impact on Brazilian assets’.”

Petrobras Suffers From Low Oil Prices

The company reeled from low oil prices. It reported a loss of $9.6 billion for 2015. Petrobras stock dipped to $2.24 in early 2016. A bribery scandal at the company and subsequent investigation showed it had ties to Brazil’s president Dilma Rouseff. Petrobras’ scandal has been a major part of Brazil’s recession. Economic destruction ravaged more than the companies. It took the money of one of the wealthiest men in the world. Eike Batista was once the eighth wealthiest man in the world.

Unfortunately, his success all came crashing down when his energy and commodity businesses crashed. First, four of his companies went bankrupt. Then his net worth dropped to $200 million.  Next, Brazilian officials seized his assets. Today, he reports having a negative net worth of over $1 billion. And today, Brazil continues to struggle amid economic and political strife.

Source: The Rio Times


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