Petrobras posts $9 billion quarterly profit but faces uncertainty

Brazil’s Petrobras has posted a net profit of 46 billion reais ($9 billion), down from the previous quarter but up 48% on the same period of last year.

The state-controlled company has endured turbulent weeks on the stock markets due to uncertainty about its future management policy following the election of ex-President Luiz Inacio Lula da Silva for the fourth term of office in Brazil.

Stock market volatility has reflected uncertainty about possible government interference in fuel pricing or changes in management policy.

Defeated incumbent Jair Bolsonaro has attacked several Petrobras bosses over fuel prices, but has stopped short of intervening in the policy. Bolsonaro has also allowed Petrobras to continue selling off non-core assets to focus on the most productive oil and gas fields and has not interfered with investment policy.

Petrobras said it will distribute about 44 billion reais ($8.5 billion) in dividends, prompting some criticism in Brazil that rewarding shareholders on this scale will undermine investment capacity.

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While the dividends represent a slowdown from the colossal $17 billion payout in the previous quarter, it means the total for 2022 stands at around 180 billion reais, well above last year’s record dividends of 101.4 billion reais.

“It’s almost impossible for Petrobras to sustain payouts to holders at these levels,” said Leonardo Rufino, a portfolio manager at Mantaro Capital in Rio de Janeiro. “Now the focus will shift to Lula’s nominations and, if a reasonable name is chosen, we could start ruling out the worst case.”

Shares have plunged 8% so far this week after Lula’s narrow victory on Oct. 30.

Brazil’s main oil union, known as FUP, and an association of oil workers who are also shareholders, Anapetro, pledged to contest the massive dividends in court even before it was announced. They argue that dividends are much bigger than investments by the state-controlled company, and that they undermine its long-term plans. Petrobras has invested $7 billion so far this year, it said.

“The bloodshed has returned to Petrobras,” Gleisi Hoffmann, a prominent lawmaker and the president of Lula’s Workers’s Party, said earlier on Thursday. “We don’t agree with this policy that takes away the company’s capacity to invest and only enriches shareholders.”

The dividends are compatible with the company’s financial sustainability in the short, medium and long terms and in line with the commitment to create value for society and shareholders, Petrobras said in a statement. Sales remained in line with the second quarter despite lower oil prices, which were compensated by higher demand for refined products in Brazil.

Petrobras’ capital expenditure of $7 billion for the first nine months of 2022 is running 14 percent higher than in the same period of last year.

Adjusted quarterly earnings before interest, taxes, depreciation and amortisation rose 50.5 percent year on year to 91.4 billion reais.