Petrobras likely to benefit from rising oil prices in 3Q

Petrobras pede esclarecimento ao governo federal sobre privatização da  companhia

Driven by the higher oil prices in the international market, Petrobras is expected to report again a robust quarterly financial statement on Thursday, when it releases the results for the third quarter. The company is expected to present higher operating revenues and cash generation. After the oil company announced, in August, the early distribution of $6 billion to shareholders, related to 2021, it will not be surprising if it makes a new announcement of this type.

Goldman Sachs believes that Petrobras will again report strong free cash flow in the third quarter and that this will make room for the company to pay up to $5 billion in additional dividends without compromising the debt reduction target. The oil company ended the second quarter with gross debt of $63.7 billion, just above the $60 billion target, which works as a trigger for the new shareholder remuneration formula — which provides for the distribution of 60% of the difference between the operating cash flow and investments.

The company is expected to benefit from high oil prices in the third quarter, when a barrel of Brent was traded, on average, at $72. For comparison purposes, in the same period of 2020, the average price was $44, while in the second quarter the international price of the commodity was $69.

With this, the expectation is that Petrobras’s net revenues will jump 74% year over year and grow 11.2% compared to the second quarter of 2021, to R$123.1 billion, according to the average of projections of four firms heard by Valor (Ativa Investimentos, BTG Pactual, Credit Suisse and Goldman Sachs).

In the case of the EBITDA, which measures the capacity to generate operating cash, the average of the projections is R$63 billion for the third quarter. The figure means a growth of 88.4% year over year and of 1.7% compared to the second quarter.

According to Safra, the financial results will benefit from the higher prices of oil and oil products and also the greater use of refineries in the quarter. The growth in fuel sales should help offset weaker oil and gas production, which fell 4.1% year over year to 2.83 million barrels of oil equivalent a day.

Net profit projections for the months between July and September range from R$11.2 billion (Credit) to R$24.6 billion (Active). The actual result depends a lot on the calculated non-recurring effects, which makes the profits projection a difficult task for analysts.

The average of the forecasts is R$18.27 billion, which would mean a reversal of the loss of R$1.5 billion reported in the third quarter of 2020. In comparison with the second quarter of 2021, however, the average of the projections represents a 57% contraction.

Credit points out that Petrobras’s cash in the third quarter will be positively impacted by the money raised from the sale of the remaining stake in BR Distribuidora (now Vibra Energia), for $2.2 billion, and by the signing of the co-participation agreement with the Chinese companies CNODC and CNOOC regarding pre-salt in the Búzios project, which guaranteed $2.9 billion in financial compensation to the Brazilian oil company.

On the other hand, cash will be negatively impacted by the payment of the first installment of early dividends, of $4.1 billion; the early redemption of bonds worth $1.3 billion in September; and the settlement of the term of commitment with Petros, of $250 million. Credit Suisse also expects that the Brazilian oil company’s debt will be negatively impacted by the start of operations of a platform in Sépia.

The Institute for Strategic Studies on Petroleum (Ineep) said Petrobras’s positive result will be driven by the domestic market. On the expenses side, the institute mentions that the weakened real will negatively impact the debt and financial results as a whole.

Source: Valor international