Petrobras Reports Production Boost

(Reuters, Gram Slattery and Marta Nogueira, 2.Aug.2019) — Brazilian state-run oil company Petroleo Brasileiro SA, or Petrobras, posted a long-awaited production boost in July after a disappointing June, as it ramped up production in the promising offshore “pre-salt” region.

In a presentation to discuss quarterly results, Petrobras said it produced 2.76 million barrels of oil equivalent per day (boepd) in the month, up from 2.633 million in the second quarter. On July 28, it said, production hit a record of 3 million boepd.

Last week, Petrobras posted lackluster second-quarter production figures and cut its 2019 guidance to 2.7 million boepd from 2.8 million, disappointing investors hungry for a long-promised production boost.

The July figures came a day after Petrobras posted a record quarterly profit, thanks largely to major asset sales.

Analysts generally saw non-recurring income and earnings before interest, taxes, depreciation and amortization (EBITDA) as in-line or slightly below expectations. But they cheered the execution of the divestments, which have brought nearly $13 billion into Petrobras coffers this year.

Preferred shares of Petrobras rose 3.1% in early afternoon trade, after climbing almost 5% earlier in the day.

“We have a mixed evaluation of Petrobras’ second quarter results,” wrote analysts at XP Investimentos. “Nonetheless, we highlight as positives the generation of cash and reduction of debt during the quarter.”

One potential area of concern were June production figures, which were in fact below expectations.

On Friday, during a Petrobras call with analysts, Brazilian oil regulator ANP said Petrobras June production came to 2.432 million boepd. Among the main reasons the ANP pointed to for the June reduction was a stoppage at Petrobras’ Cidade de Mangaratiba FPSO, a type of ship used to produce and process oil.

Petrobras’ exploration and production head, Carlos Alberto Pereira de Oliveira, also pointed to other one-off issues, such as a production stoppage at an FPSO in the Buzios field.

Executives also warned on the call that any dividend payments would be minimal until Petrobras reaches its goal of attaining a net debt to EBITDA ratio of 1.5. That ratio currently stands at 2.69.

To reach that goal, the executives said they would continue with aggressive divestments, such as the multi-billion sale of eight refineries.

Petrobras downstream head Analise Lara said in a call with analysts that Petrobras had received many expressions of interest in the refineries from trading firms, local distribution firms and international oil companies.

($1 = 3.88 reais)

(Reporting by Gram Slattery; Editing by Bernadette Baum and David Gregorio)


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