Maurício Tolmasquim, executive director of energy transition and sustainability at Petrobras, said on Thursday (19) that the state-owned company has set aside $11.5 billion to investments in renewable energies.
In a presentation at the Brazil-US Climate Impact Summit 2024, organized by Valor and AmCham at the United Nations (UN) headquarters in New York, Mr. Tolmasquim pointed out that the company has already reduced its absolute greenhouse gas emissions by 40% and its methane gas emissions by 70%. The company will allocate 11% of its investments to the energy transition.
According to him, these amounts are three times higher than emissions from Brazilian domestic aviation.
Mr. Tolmasquim, who used to be president of the Energy Research Company (EPE), responsible for planning the sector in Brazil, pointed out that the goal of limiting the rise in temperature to 1.5 degrees Celsius implies a 7% annual reduction in greenhouse gas emissions.
The Petrobras executive stressed that this 7% drop is equivalent to what happened during the COVID-19 pandemic. “We’d need one COVID a year to meet the target. So we can see the size of the challenge,” he said, noting that this reduction, unlike what happened during the pandemic, should happen without the impacts on the economy and society caused by COVID-19.
He pointed out that this need for reduction will have a significant geopolitical impact, increasing the need for dialogue between countries and a change in primary energy sources.
Mr. Tolmasquim pointed out that Brazil has the advantage of having a renewable energy mix, with 50% of the total coming from renewable sources. For this reason, he said, Brazil can deepen trade partnerships with the United States, China, and the European Union.
In electricity, the level jumps to 91%, while the world average is 30%. In transportation, he stressed, 35% of the Brazilian matrix is renewable.
*Por Robson Rodrigues, Rafael Rosas — Nova York, Rio de Janeiro
Chambriard was inaugurated as CEO of Brazil’s state-owned oil company and member of the board of directors this Friday
24/05/2024
Magda Chambriard — Foto: Tânia Rêgo/Agência Brasil
Petrobras announced this Friday (24) that its board of directors has approved the appointment of Magda Chambriard as a board member and has elected her as the new CEO of the company.
Ms. Chambriard assumed both positions this Friday and joined the board immediately, without the need to convene a shareholders’ meeting, the state-owned company said.
The new CEO of Petrobras is an engineer who has built her career within the company. She served as the director-general of the National Agency of Petroleum, Natural Gas and Biofuels (ANP) from 2012 to 2016.
The executive takes over the position vacated by Jean Paul Prates, who was dismissed by President Lula on May 14 after a series of disagreements regarding the management of the company.
The antitrust watchdog allows Petrobras to negotiate new pipelines and sets new conditions for the state-owned enterprise
05/23/2024
With the antitrust watchdog’s latest decision, Petrobras will retain ownership of some refineries it was initially required to divest, including Repar, in the state of Paraná — Foto: Divulgação
Petrobras has successfully renegotiated the terms of its 2019 agreements with the Administrative Council for Economic Defense (CADE), the antitrust regulator. The agreements were initially established to suspend investigations into Petrobras’s dominance in the refining and gas markets. With the new arrangement, approved by CADE’s tribunal on Wednesday, Petrobras is no longer obligated to divest five of its refineries and the Transportadora Brasileira Gasoduto Bolívia-Brasil (TBG).
Under the revised terms, Petrobras faces new responsibilities. Notably, CADE will oversee the methodology used to set oil prices at refineries for the next three years and renewable energy pricing for an additional three years. In the gas sector, although Petrobras will maintain its investment in TBG, it will relinquish operational control, as the pipeline operator is to appoint independent members to its board of directors.
Should Petrobras fail to comply with these stipulations, CADE retains the authority to reopen investigations. Any findings of misconduct could result in penalties for Petrobras, including fines and mandatory changes to its business practices. Existing inquiries into allegations of price discrimination will be on hold throughout this monitoring period.
This agreement, the result of months of negotiations with CADE, coincides with a leadership transition at the state-owned company. Magda Chambriard, recently endorsed by the company’s eligibility committee, is set to assume the presidency with a directive to augment Petrobras’s refining operations.
The initiative to revisit these agreements began under the leadership of Jean Paul Prates in 2023. The company communicated to its board that the mandated divestments conflicted with its strategic objectives, a plan originally put into place during the Bolsonaro administration.
Following the new agreement, Petrobras has proceeded with the sale of three refineries: Six (Pará), Reman (Maranhão), and Rlam (Bahia). However, with CADE’s latest decision, the company will retain ownership of the other refineries it was initially required to divest: Repar (Paraná), Refap (Rio Grande do Sul), Rnest (Pernambuco), Regap (Minas Gerais), and Lubnor (Ceará).
As part of the commitments negotiated with CADE, Petrobras will also make public its general commercial policies for oil deliveries to ensure non-discriminatory practices. It will offer a specific type of contract, known as a Frame agreement, to any independent refinery on Brazilian soil concerning oil supply. Additionally, Petrobras is required to provide easy access to confidential data to facilitate ongoing monitoring by the antitrust watchdog.
During the session, CADE’s president, Alexandre Cordeiro, emphasized that the proposed consent decree for refining will not only bolster the transparency of Petrobras’s operations but also enhance CADE’s ability to access complex information, thus improving oversight.
He also noted that the proposal includes a robust monitoring mechanism that enables CADE to promptly verify Petrobras’s compliance with competition rules and respond swiftly to any discriminatory practices. Other board members echoed the significance of this structure, which aligns with the technical opinion provided by CADE’s General Superintendence.
Board member Camila Cabral Pires Alves emphasized the critical nature of monitoring the commitments outlined in the consent decree to ensure the effectiveness of the negotiated remedies. Meanwhile, board member Gustavo Augusto clarified that the consent decree aimed to foster the entry of new economic players into the refining market, rather than privatizing the refineries. “We are focused on maintaining the goals and making a technical correction in how these goals will be achieved,” he noted, adding that repurchasing assets that had been divested would not be appropriate.
Board member Diogo Thomson reported that the gas consent decree had been largely fulfilled, and the adjustment made—removing political control over TBG—was enabled by subsequent legislation. This change allows the state-owned company to continue its investments in vital infrastructure and further opens up the market.
In a notice to the market, Petrobras noted that the appendix to the refining consent decree emerged from “extensive debate” with CADE. The company explained that it was unable to sell the remaining refineries, necessitating a revision of its strategic plan.
Petrobras detailed that the frame agreement model sets foundational terms for negotiating oil volumes on a cargo-by-cargo basis. It specifies that the obligation to buy and sell will only be established if both parties reach an agreement on pricing, ensuring alignment with the prevailing market conditions at the time each deal is finalized.
Regarding natural gas, the company noted that the New Gas Act, enacted after the 2019 agreement, provides an exemption from de-verticalization for companies that were already vertically integrated. This exemption is contingent upon these companies adhering to independence and autonomy requirements, which are to be regulated by the National Petroleum Agency (ANP). Consequently, specific obligations have been negotiated to ensure the operational independence of TBG.
However, lawyer Thiago Silva, a partner at Vieira Rezende Advogados, argues that under the New Gas Act, de-verticalization remains a legal imperative that must be addressed eventually. There is a two-year window for the ANP to publish the relevant resolution on this matter. “The exemption does not permit permanent vertical integration but rather provides a timeframe for compliance, which has not yet commenced,” he explained. Mr. Silva also pointed out that distributors currently face scrutiny over plans that appear similar to transportation projects and are under pressure to regularize their operations.
*Por Beatriz Olivon, Fábio Couto — Brasília and Rio de Janeiro
Sérgio Caetano Leite, the oil company’s chief financial and investor relations officer, says that the pilot project involving 157 million shares is 86% complete
05/10/2024
Sérgio Caetano Leite — Foto: Leo Pinheiro/Valor
Petrobras is studying a new stage in its share buyback program, which began last year, Sérgio Caetano Leite, the company’s chief financial and investor relations officer, told Valor. “All the big oil companies, the counterparts, do it and treat the buyback as shareholder remuneration,” said Mr. Leite.
The first step was taken in 2023 and involved a pilot project of around 157 million preferred shares, which is 86% complete, Mr. Leite said. “We set August as the deadline to finish [the program], and the results are exceptional because, on average, these buyback programs stop at 70%, 75%,” he compared.
The executive spoke to Valor between appointments at the Offshore Technology Conference (OTC), the oil industry’s main event, in Houston, Texas. Mr. Leite said that the company has enough cash to finance the planned investments, without the need to resort to the financial market. The company recently issued $250 million in bonds abroad to exchange expensive debt for cheaper debt. According to the executive, the company is monitoring the market for similar operations.
Mr. Leite also said that volatility explains the long period without any change in fuel prices: diesel oil has not been adjusted for more than 100 days, while gasoline has had no change in refineries in the last six months. The volatility, he said, prevents the company from seeing a clearer scenario to define the direction of the prices of oil products. Read below the main excerpts from the interview:
Valor:Petrobras carried out a share buyback program last year. Does the company have any plans for a new round?
Sérgio Caetano Leite: The body that authorizes the buyback is the board of directors and there is prior governance: we do internal studies, which go through committees. The management team approves [the proposal] and it goes to the board, which approves [the operation]. Share buybacks were included as another form of shareholder remuneration. All the big oil companies, the counterparts, do it and treat the buyback in this way, as shareholder remuneration. We approved this pilot project, around 157 million preferred shares, and we have already surpassed 86% of the total number of shares put up for repurchase. We set August as the deadline to finish [the program], and the results are exceptional because, on average, these buyback programs stop at 70%, 75%. We respond to Brazilian legislation and U.S. legislation, CVM (Securities and Exchange Commission of Brazil) and SEC (U.S. Securities and Exchange Commission). So we had to be careful before starting this program, hence the decision to do the pilot first. One of the characteristics of the buyback program is that if you are going to release any notice of material fact, any press release, anything that could impact the share price, you have to stop the buyback. It takes two or three days to be able to repurchase. Petrobras issues more than two announcements a week. Another characteristic is that if the company’s board of directors learns of something that could affect the share price, even if they haven’t communicated it, they have to stop [the buyback operation].
Valor:Companies usually buy back shares when they believe they are cheap. Do you agree with this view?
Mr. Leite: It’s a sign, but note that in the case of Petrobras, we bought and canceled the shares, we didn’t hold them in treasury to sell again later. That would be legal, but it wasn’t our strategy. Some companies buy back shares and hold them when they see that prices are low. This is not the case, as Petrobras has reduced the number of shares on the market. That’s why it’s considered a form of remuneration. A Petrobras shareholder has two forms of remuneration. One is dividends and the other is appreciation. If I bought a set of shares for R$100, the end of the year comes and they are worth R$150, then we distribute value in the form of earnings in addition to dividends. They are also divided by the number of shares. When you reduce the share base, you can earn on the appreciation and the next dividends will be divided among a smaller number of shares. That’s why it’s considered shareholder remuneration. We are discussing the new phase of the program. The idea is to propose it to the board of directors and, if approved, we will continue to expand the program.
Valor:Can the discussion about dividends return in the face of higher oil prices?
Mr. Leite: We’ve chosen to distribute extraordinary dividends at the end of the year, and there’s a reason for that: it’s because you visualize the full year. You can have good quarters and bad quarters. To be clear, for years we’ve only released extraordinary dividends at the end of the year because we’ve been able to see the full picture. The dividend formula is in place and until someone decides to change the policy—and this decision was not made—it [the current policy] will be applied and the extraordinary dividend will be paid. Of course, if oil prices surge, we generate more cash because we sell abroad at a higher price.
Valor:Oil prices are volatile. Does this make setting fuel prices opaquer?
Mr. Leite: Since we revised our commercial strategy last year, we have maintained and reinforced the objective of not passing on volatility directly to the end customer, for various reasons, including the fact that it’s not good. Brazil runs on diesel. Imagine a truck that leaves home with one price, calculates the freight, the price of fuel changes halfway through, and when it gets there [at the destination] to return it’s another freight price. It makes no sense. And it’s bad for Petrobras’s cash flow predictability. If we sell assuming volatility, you can sell with the price down and lose money, or sell a contract [with the price] up and leave the market, because the competitor starts putting in more product.
Valor:So what is the strategy?
Mr. Leite: The strategy has a variation range and we follow it. As long as it’s in the range, we don’t make any sudden moves. When there is a structural change, that’s the time to make the move. Petrobras always ends up being the target of comments, but what happens is that companies, associations, and operators have no way of calculating Petrobras’s price [exactly]. Petrobras is the most efficient fuel importer on the market because of its infrastructure. We have logistical and competitive advantages. Our policy dictates that we shouldn’t sell below the marginal value and, when Petrobras is at the marginal value, it has a very good margin. We keep observing the market every day, every week. When we have to change, we will.
Valor:The company used to be the world’s most indebted oil company and today it’s holding its own. Is there room for Petrobras to take on more debt?
Mr. Leite: At Petrobras, debt is made up of two parts, financial and accounting, which comes from IFRS [International Financial Reporting Standards] rules. Our debt is made up of contracts, such as Floating Production, Storage, and Offloading (FPSO) units, helicopters, all kinds of ships. The financial debt comes from issuing bonds. And 100% of the investments in Petrobras’s strategic plan, those R$500 billion, just over $100 billion, are paid for with cash generation. Petrobras doesn’t raise money for investment. The strategic plan is funded with the company’s own money. Up until now, capital discipline has meant that the company has financed the entire plan with its own cash. Last year, Petrobras won two or three awards with a global bond we issued, for $250 million. A pool of 13 or 14 banks handled the operation. We got low rates, and we were equivalent to AAA [investment grade] companies. The market recognized the quality of the securities and we had overdemand. If we issued twice as much, people would buy it. We haven’t issued since 2020 or 2021. And we did it for several reasons. One was to see how the market was viewing the company. And because the rates were in our favor. It’s important to be in the debt market. We had a financial debt of $28 billion, we issued R$1.25 billion [$250 million] and today we owe $27 billion. In the past, rates were higher, we borrowed R$1.25 billion and used the money to buy bonds. We call this debt curve management. Whenever the market shows a rate mismatch in our favor, when there is an opportunity to lower the debt, we tap the market and buy the old debt. We don’t need to issue to do projects. That’s with our cash reserves, it [the cash flow] gives [space] and there’s leftovers, which you see in the form of dividends.
Decision could end dispute involving actions worth R$55.2bn and help government reduce primary deficit to zero
04/09/2024
Agreement could put an end to a dispute involving actions totaling R$55.234 billion — Foto: Roberto Pagot/Agência Petrobras
State-owned oil company Petrobras is studying the possibility of entering into a tax settlement to be proposed by the federal government regarding charter agreements for oil rigs, Valor learned from two sources familiar with the matter.
The agreement could put an end to a dispute involving actions totaling R$55.234 billion and, at the same time, help the government to reduce its primary deficit to zero this year.
The draft notice was released for public consultation on Friday (5) by the Attorney General’s Office of the National Treasury (PGFN) and the Federal Revenue Service. It will receive inputs until next Friday (12). The notice is expected to be published by the government by the end of the month when the companies would be able to join the agreement.
The subject was one of the topics discussed at a meeting at the Planalto Palace last week, attended by Chief of Staff Rui Costa and ministers Fernando Haddad (Finance), and Alexandre Silveira (Mines and Energy). They also discussed the issue around Petrobras’s extraordinary dividends.
According to a government source, the state-owned company is likely to join the tax settlement, as it has been losing proceedings on the subject at the Administrative Council of Tax Appeals (CARF).
The company’s executive board is weighing the pros and cons of entering into the agreement, which could end actions worth R$55.234 billion if all litigation is included in the deal. If the agreement is accepted, the oil giant will receive a discount on the debt amount.
However, in its financial statements, Petrobras describes processes related to charter agreements as a “possible loss,” claiming that there are manifestations in favor of the company’s understanding in higher courts.
“The company ratifies the classification [of withholding income tax, IRRF] of the loss as possible as there are manifestations in favor of the company’s understanding in superior courts and will seek to ensure its rights,” says an excerpt of the 2023 fourth quarter’s financial statements.
“The other processes involving [federal tax] CIDE and [social taxes] PIS and Cofins are in different administrative and judicial stages and are described as possible losses as there is a legal provision in line with the company’s understanding,” Petrobras added in its financial report.
The notice placed for public consultation allows the tax settlement—a type of agreement to end administrative or judicial dispute—on the levy or not of IRRF, CIDE, PIS, and Cofins on remittances abroad, arising from the bipartition of the legal transaction in a charter agreement regarding vessels or oil rigs.
It is the so-called settlement of major tax theses, which is being carried out by the Federal Revenue and the PGFN to end disputes and secure revenue for the federal government. That is because, if there is no agreement, even if the federal government wins the dispute at the CARF, companies can appeal in processes that drag on for years.
According to the notice draft, companies that enter into the charter agreement will be allowed to choose from two payment options. The first option offers a 60% discount on the total debt amount. The remainder must be settled with a down payment of at least 30% and the balance in up to six monthly installments.
The second option offers a 35% discount on the total debt amount. The remainder must be paid with a down payment of at least 10% and the balance in up to 24 monthly installments. The draft also says the tax settlement may include the use of tax loss credits and negative tax base on the Social Contribution over Net Profit (CSLL), up to a cap of 10% of the remaining balance after the initial discount has been applied.
The tax settlement is one of the economic team’s major bets to increase tax revenue and get closer to the target of reduce primary deficit to zero in public accounts this year.
In the latest federal budget revenue and expenditure assessment report, the government estimated R$36.6 billion for these initiatives, which involve other notices and individual transactions, in addition to the issue of the charter agreement. Petrobras did not respond to a request for comment.
A $1.5bn investment fuels launch of Hisep pilot project
22/02/2024
Carlos Travassos — Foto: Gabriel Reis/Valor
Petrobras revealed on Tuesday that it has initiated trials for an innovative technology designed to separate oil from CO2-rich gas directly on the seabed. This technology, known as Hisep, is a creation of the Petrobras Research Center (Cenpes) and represents a significant advancement in the field. The development is supported by a substantial investment of $1.7 billion from the consortium responsible for the Libra block in the pre-salt Santos Basin. This consortium includes Petrobras itself, along with industry giants Shell, Total, and the state-owned Pre-Sal Petróleo (PPSA), as well as Chinese entities CNPC and CNOOC.
Out of the total investment, $1.5 billion fuels the launch of the Hisep pilot project. The remaining $200 million is earmarked for the establishment of the Brazilian Pre-Salt Technology Center (CTPB), a collaborative effort with the Federal University of Itajubá (Unifei), located in the state of Minas Gerais.
The Hisep technology is set to undergo pilot testing in the Mero 3 field within the pre-salt Santos Basin. Following this testing phase, Petrobras anticipates that the technology will be operational by 2028. Positioned within the Libra area, the Mero field is recognized as the third-largest in the pre-salt region.
Petrobras’s Engineering Director, Carlos Travassos, highlighted the significant advantages Hisep technology is set to bring to the company’s operations. With its implementation, Petrobras expects not only to streamline efficiency but also to unlock substantial value. The innovative technology is projected to slash the weight of platforms by an impressive 65%, leading to a consequential reduction in the number of personnel required onboard. Furthermore, the potential for commercializing this technology to other entities in the oil sector presents an additional revenue stream.
“By integrating Hisep, we anticipate a transformation in the layout of the Floating Production, Storage, and Offloading (FPSO) units, particularly the ‘topside’ or upper part of the FPSO, which can reduce the cost of the platforms. This technology allows for a significant portion of the processing plant to be relocated from the FPSO to the seabed,” says Mr. Travassos. The FPSO platform produces, processes, stores, and drains oil.
In a strategic move to advance the Hisep project, Petrobras entered into an agreement with FMC Technologies do Brasil, a TechnipFMC subsidiary, in January. This partnership is tasked with developing the necessary infrastructure for Hisep. The initiative will kick off with the FPSO Marechal Duque de Caxias, which is designed to process up to 180,000 barrels of oil and 12 million cubic meters of gas daily.
Jean-Paul Prates, CEO of Petrobras, emphasized the environmental and operational benefits of their latest technological advancement, Hisep. He said that the primary advantage of this innovation lies in its capacity to mitigate the environmental impact of polluting gases at the source. “Decarbonization is crucial for the sustainability of oil extraction activities, enabling us to continue utilizing hydrocarbons,” Mr. Prates said. After separation, Hisep allows for the immediate reinjection of these gases back into the subsea wells.
“In the near future, Hisep will significantly reduce the need for personnel in high-risk areas of the platform, mirroring our successful efforts to eliminate diving operations by reallocating staff to safer roles. This strategic move bolsters our production efficiency,” he said.
Senator Prates, picked by President Lula to run state-owned oil company, said prices will be aligned with international market
01/05/2023
Jean Paul Prates — Foto: Edilson Rodrigues/Agência Senado
Senator Jean Paul Prates, picked by President Luiz Inácio Lula da Silva to head Petrobras, said Wednesday that the promised change in the fuel price policy will not include a direct intervention in the market.
Mr. Prates also made it clear that the calculation for price rises will continue in line with what is practiced internationally – but will no longer follow the so-called import parity price, a policy put in place in 2016, during the Temer administration, in which the variation of Brazilian fuel prices occurs according to the prices of oil and oil products in the main markets. “It will not unlink from the international price, it will unlink from the import parity, without imposing a tariff, with no direct intervention in the market, just using the competitive advantage,” he said.
Mr. Prates’s statements brought some relief to local assets in the trading session and allowed Brazil’s benchmark stock index Ibovespa to rise for the first time in 2023 driven by the appreciation of Petrobras shares. The stocks ended the day up 1.67% (common shares) and 3.18% (preferred shares).
He also guaranteed that the measures will be taken in a predictable way. “Saying that the IPP will end doesn’t mean the price will be disassociated from international swings. Only that we will use the fact that it is produced domestically in favor of the Brazilian economy. We will discuss it with all interested parties,” he said.
Mr. Prates spoke to reporters after the inauguration ceremony of Vice President Geraldo Alckmin as Minister of Development, Industry, Commerce, and Services (MDIC). Among other measures under study, Petrobras’s future CEO advocated that a stabilization account for fuel prices must be followed by other measures such as an “ad rem” rate – in currency, instead of percentage – and the return of the federal tax Cide “to recover the collection of the states.”
He also said that the measure is implemented quickly, comparing its absence to being in a car without wearing a seatbelt. “I think it is important to have [the stabilization account soon]. You’re always at risk. You’re riding without a seatbelt,” he said. “I think having a cushion like that, and then suddenly using Cide again, getting some of the revenue back for the states somehow, using a flat, ad rem tariff. Putting currency instead of percentage, because when the price goes up, the tax does not go up in the same proportion. But at least the price is not inflated from the inside,” he said. “If you use ad rem, single-phase tariff, single rate, and the states are comfortable, it’s good, it works. The problem is that cutting taxes from the states abruptly was an emergency solution,” he added.
President Jair Bolsonaro eliminated the collection of federal taxes (Cide and social taxes PIS and Cofins) on fuels last year, amid the rise caused by the war in Ukraine. He also sponsored a bill that transformed fuels into essential products, limiting the collection of the sale tax ICMS to the minimum rate of each state, between 17% and 18%.
The measure reduced prices, but also affected revenue collection by state governments. “No structural solution was put in place. The solution was to take money from states,” he said. “It’s not a smart solution. It is even a somewhat punitive palliative. You are not fighting volatility. If another country goes to war with an oil-producing country, you won’t have anywhere else to cut. There was not a solution.”
Mr. Prates reiterated that the price policy will not “revoke the market,” but will take into account “the actions of the National Petroleum Agency, the ministry, and the market practice.”
The senator also said that the pricing policy is the country’s, not the oil company’s. “Petrobras follows the context. The instance of Petrobras’s decision concerns Petrobras’s customers. And the national context instance concerns the Ministry of Finance and the Ministry of Mines and Energy,” he said.
Uncertainty about the future of the state-run oil company and recovery in China explain the distance
12/13/2022
In mid-October, when Petrobras shares peaked, the state-owned company was the most valuable company on the Brazilian stock exchange, R$116 billion ahead of second-place Vale. By early November, after the second round of presidential elections, the gap had narrowed to R$85 billion. Within two weeks, on the 11th, Vale had moved ahead. Today, one month later, the mining company has already put R$77 billion ahead.
The swap of positions, which seems to have come to last, was the result of the combination of uncertainty about the future of the state-run oil giant with the return to power of the Workers’ Party (PT) and the expectation of a recovery in China, the main market for Vale, with the easing of restrictions because of Covid-19. Iron ore has been up 9% in the month.
Investors’ distrust of the election winners, which was great before, has only increased with the news over the last few weeks, following the movements of the huge transition team. Monday, the day of the graduation of the elected, two pieces of information did the damage: Aloizio Mercadante would be considered to be the CEO, and the state-owned companies law would have its days numbered.
At 4:00 pm, Petrobras preferred shares fell 4.17% to R$23.68, accumulating an 11% drop in the month and 30% since October’s record high of R$33.72 — equivalent to R$187 billion less in market capitalization. Meanwhile, oil was up 2.48%.
It has been such a good period for the oil companies that the stocks remain in the black for the year, up 42%, while Ibovespa went into the red today. Among peers, however, Petrobras has also fallen behind. Prio, considered by analysts as an option for the state-owned company to invest in the sector, rose 63% in the year. The American Exxon advanced 71%.
Strategic plan reiterates priorities in deep water oil
12/05/2022
Petrobras’ oil target for the next five years, according to the 2023-2027 strategic plan, is aligned to the previous plan — which did not take the market by surprise. It ratifies the state-owned company’s priority to invest in the deep-water oil. However, a lower oil production forecast for the period drew attention, not because of volume, but for the company’s attention to the natural decline of those fields, which will require new contributions to maintain the desired production level.
Petrobras projects for 2023 a production of 2.6 million barrels of oil equivalent per day (boe/day), a measurement unit that includes the extraction of oil and natural gas, which translates into an operated production (in partnership with other companies) of 3.8 million boe/day, according to Fernando Borges, the head exploration and production, when presenting the 2023-2027 strategic plan last week.
The extracted volume would reach 3.1 million boe/day in 2027, the same estimated for 2026, with production operated at around 4.7 million boe/day. “Production is increasing,” the executive also said, “due to the development of assets in terms of pre-salt development mainly in this leverage period.”
In 2023, 74% of production will come from the pre-salt, rising to 78% in 2027. The figures are very close to those indicated in the 2022-2026 plan. However, Petrobras has indicated a reduction in production by 100,000 barrels per day, due to two reasons. The first cause is the co-participation agreement in the fields of Sépia and Atapu, both in the Santos Basin pre-salt.
According to Petrobras, this adjustment was necessary because the strategic plan 2022-2026 was released on November 24, 2021. A month later, on December 17, 2021, Petrobras acquired, in consortium with partner companies, the rights to exploration and production of the volumes exceeding the transfer of rights in the two fields, in the Second Round of Bids for the Surplus of the transfer of rights under the production-sharing regime for pre-salt oil fields.
Since the fields were under two regimes (transfer of rights and sharing), adjustments were needed in the participation of the companies in the fields. The 2023-2027 plan, in practice, reflects those adjustments, which resulted in a lower production projection. Another reason are adjustments in the interconnection schedule between wells, in the years 2024 and 2025, which were offset by the company’s total and commercial production projections.
For Ilan Arbetman, the chief economist of Ativa Investimentos, the loss of production in these years is compensated in the future with more value generation for Petrobras. “It’s something that brings efficiency gains in the future,” said Mr. Arbetman.
Mr. Borges highlighted the 9% increase in investments in exploration in new areas, to $5.5 billion, focused on replacing the production that will be lost with the natural decline of the fields in production. According to him, “we are fighting against a natural decline of about 10% a year. This means adding 300,000 boe/day to production in order to cope with the decline and maintain production at around 3 million barrels. One of the focal points is the Tupi field, one of the biggest producers in the pre-salt. According to Mr. Borges, Tupi is a field that will need to increase water injection, a technique used to extract more oil from reservoirs.
Petrobras raised its investment forecast for the next five years by a little more than $7 billion, to $64 billion, due to the incorporation of the Sepia and Atapu fields to Petrobras’ portfolio, among other reasons. Two-thirds of this amount is still destined for the pre-salt. Post-salt areas in the Campos and Sergipe-Alagoas basins will demand 24% of this amount, two percentage points less than the previous plan, but, according to Mr. Borges, the planned investment of $18 billion in the Campos Basin aims to offset the decline of other fields.
For financial services provider UBS, Petrobras was conservative in the production target, when considering, also, delays in the operation of fields in the Sergipe-Alagoas basin. UBS highlighted, however, the resilience of the projects in a stress scenario, with a barrel price at $35, and the 18 new platforms (FPSO, the acronym in English) starting operations, half of the new units in the world.
Workers’ Party criticized decision, as unions and minority shareholders filed lawsuits to cancel extraordinary payment
11/04/2022
Petrobras announced on Thursday afternoon the distribution of dividends worth R$43.68 billion related to the results of the third quarter. The payment was approved in a meeting of the Board of Directors, even after the Association of oil workers and minority shareholders of Petrobras (Anapetro) filed a lawsuit with the Prosecutor General’s Office (PGR) requesting the Federal Supreme Court (STF) to halt the distribution.
The high distribution of dividends by the state-owned company is the target of criticism from members of the Workers’ Party (PT), of President-elect Luiz Inácio Lula da Silva, victorious in Sunday’s election. In the elected government team, the view is that the scenario reduces the company’s investment capacity.
The company Thursday afternoon released a material fact with the announcement of the distribution of R$3.35 per preferred (PN) and common (ON) stock in circulation. The first installment, worth R$1.67445 per stock will be paid on December 20, followed by a second installment, worth R$1.67445 per stock to be paid on January 19, 2023.
Adding dividends and interest on equity capital (IOC), the company has already approved the payment of R$179.98 billion in proceeds related to the results of the first three quarters of 2022. The amount is much higher than last year. During the entire fiscal year 2021, the company paid R$101.39 billion in dividends.
The company’s dividend policy provides that when it has gross debt of less than $65 billion, the company may distribute to its shareholders 60% of the difference between operating cash flow and investments. The policy also provides for the possibility of paying extraordinary dividends, provided that this does not affect the company’s financial sustainability. “There are no investments held back due to financial or budgetary constraints, and the decision to use the surplus resources to remunerate shareholders presents itself as the most efficient for optimizing the allocation of cash,” said the company in the material fact released on Thursday.
About R$20 billion of the amount announced on Thursday may go to the federal government. In a letter sent to the stated-owned companies in July, the Economy Minister had asked for an increase in revenue from dividends to cover the costs of the proposed constitutional amendment that allowed the payment of Auxílio Brasil of R$600, in addition to the handouts for truckers, taxi drivers and cooking gas vouchers.
PT’s president Gleisi Hoffman classified the volume of dividends as a “bloodletting” in the company. “We do not agree with this policy that deprives the company’s investment capacity and only enriches shareholders. Petrobras has to serve the Brazilian people,” she said in a post on social media. In the lawsuit, Anapetro also says that a mixed economy company, such as Petrobras, differs from a 100% private company by using the company’s profits to make “strategic investments” capable of ensuring “sustainability”, as well as the fulfillment of its social function. Instead, it says, the current policy has transformed the company, according to the association, into “a notorious distributor of lucrative dividends that have turned the company into a cash cow of the market.”
The entity also sent a letter to the board of directors of the state-owned company asking the collegiate to abstain from voting on this matter. The association argued that the dividend distribution refers to the company’s financial statements that will be approved in a shareholders meeting to be held only in April next year, after the government transition. In the letter sent to the collegiate, to which Valor had access, the president of Anapetro, Mário Dal Zot, says that the federal government, Petrobras’ controlling shareholder, guides the company to act in a harmful way to the national interest by “not having long-term planning that allows an efficient and timely energy transition.”
Jean Paul Prates — Foto: Edilson Rodrigues/Agência Senado
“We are facing a clear scenario of abuse of rights by Petrobras’ controlling power. If this abuse was already established with the distribution of dividends in this amount, the situation is aggravated by the post-electoral scenario and the generating obligations to the future management of Petrobras,” says the document. Anapetro, together with the Parliamentary Front in defense of Petrobras, chaired by Senator Jean Paul Prates (PT, of Rio Grande do Norte), will file a new lawsuit today in the Federal Court against the dividend distribution announced by the company. Mr. Prates is one of the names listed to assume the presidency of the state-owned company in the future Mr. Lula da Silva’s government.
For André Vidal, head of oil, gas and basic materials of XP, the payment of dividends does not compromise the accounts of the state-owned company, which “keeps generating enough cash” and has been operating under the leverage of its financial policy, which talks about a target of $60 billion of gross debt and may reach $65 billion. At Thursday’s Petrobras board meeting, nine members voted in favor of the dividend payment and two were against, according to sources. Currently, the board has four executives appointed by minority shareholders, a representative of the employees, and six appointed by the federal government, including the CEO of the company, Caio Paes de Andrade.
The Unified Federation of oil workers (FUP) also sent a letter to Mr. Andrade, with a request for the company to engage in the government transition process. In the letter, FUP’s general coordinator, Deyvid Bacelar, asks the company to guarantee the necessary information for the new managers that will take over the company after 2023.
*By Gabriela Ruddy, Fábio Couto, Maria Cristina Fernandes — Rio de Janeiro, São Paulo
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