March 20, 2017 / 4:20 PM / a year ago

UPDATE 1-Petrobras seen reversing loss on higher oil, lower writedowns

 (Adds share performance, details throughout)
    By Guillermo Parra-Bernal
    SAO PAULO, March 20 (Reuters) - Petróleo Brasileiro SA,
Brazil's state-controlled oil company, likely returned to a
profit in the fourth quarter, reflecting the impact of higher
average oil prices, lower asset writedowns and cost-cutting,
analysts said on Monday.
    Rio de Janeiro-based Petrobras probably earned 3.701 billion
reais ($1.2 billion) last quarter, reversing a net loss of
16.458 billion reais in the third quarter, according to the
average analyst estimate compiled by Thomson Reuters. Petrobras
lost a record 35.8 billion reais a year earlier.
    The company plans to unveil results after the market closes
on Tuesday, and executives will discuss the report with
investors on a conference call the following day.
    Chief Executive Officer Pedro Parente is reining in costs
while implementing fewer revisions to the value of some assets,
after large write-downs in the past year. The numbers reflect
how Petrobras is weathering fallout from a bribery probe of
contracts with local building firms that triggered impairments
and investor lawsuits since early last year.
    For the full year, Petrobras probably posted a net loss,
which could lead the company to forgo dividend payments for
another year, analysts said.
    A stable currency, a product of growing confidence in Brazil
in the wake of former President Dilma Rousseff's ouster last
year, brought down costs for Petrobras, the world's most
indebted major oil firm. The average price for Brent crude oil
rose $5 per barrel in the fourth quarter, helping offset
increases in gasoline costs, analysts said.
    Even as Petrobras raised wages more than inflation for a
collective bargaining agreement, costs and expense controls will
be boosted by a large worker retirement program reflecting a
slimmer payroll, accident-reduction efforts and higher
productivity at some wells, Credit Suisse Securities analyst
André Natal said.
    Brazil's improved outlook is helping bolster corporate
earnings for Petrobras and other local companies, which suffered
with escalating political and economic turmoil in the previous
two years.
    Investors will also focus on management comments on the
status of the asset sale plan, the outlook for production and 
capital spending for this year, and how a new domestic pricing
policy may help boost margins, analysts said.
    They expect Petrobras to disclose how it plans to record a
provision against 185 billion reais in contingent liabilities.
    Preferred shares, the company's most widely
traded class, gained 2.2 percent to 13.46 reais in early Monday
afternoon trading, paring back year-to-date losses to 9.4
percent. In contrast, Brazil's benchmark Bovespa stock index
 is up 8 percent in the same period.
    The stock performance is due in part to delays in Parente's
plan to divest assets not deemed essential, in the midst of
tougher regulatory oversight. Petrobras has a goal of about $19
billion in divestitures and new partnerships by December 2018.
    Money from divestitures could begin to flow more rapidly
this quarter, when Petrobras expects to conclude a few deals
after receiving clearance from state audit court TCU.
    Net revenue probably rose to an average 74.762 billion reais
last quarter, up 6 percent from the prior three months. Adjusted
earnings before interest, taxes, depreciation and amortization
was seen falling 1.5 percent to 19.707 billion reais on a
quarter-on-quarter basis, according to the consensus estimate.
    Capital spending fell 8 percent in the fourth quarter,
estimates showed.
    The following is a table with analysts' consensus estimates
for key fourth-quarter indicators at Petrobras. All figures are
in Brazilian reais unless otherwise specified:     
             Q4 2016   Q3 2016  Q4 2015       Pct Change
              (Est.)                      qtr/qtr     yr/yr
    Net       74.762   70.433   85.103    6.1 pct   -12.2 pct
  Revenue      bln       bln      bln               
              reais     reais    reais              
 Net Income   3.703       -        -        N/A        N/A
               bln     16.458   35.582              
              reais      bln      bln               
                        reais    reais              
  Adjusted    21.277   21.603   17.064   -1.5 pct   24.7 pct
   EBITDA      bln       bln      bln               
              reais     reais    reais              
  Adjusted   28.5 pct   30.7     20.1       N/A        N/A
   EBITDA                pct      pct               
    ($1 = 3.1023 reais)

 (Editing by Jeffrey Benkoe and Dan Grebler)
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