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Petrobras considers billion-real agreement with federal government

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

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.

*Por Jéssica Sant’Ana — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Petrobras initiates trials for breakthrough decarbonization technology

A $1.5bn investment fuels launch of Hisep pilot project

22/02/2024

Carlos Travassos — Foto: Gabriel Reis/Valor

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.

*Por Kariny Leal — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Petrobras’s future CEO rules out intervention on fuel prices

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

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.

*By Vandson Lima, Cristiane Agostine, Fabio Murakawa — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Petrobras has lost R$187bn since its October peak

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%.

*By Nelson Niero — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Petrobras expects lower pre-salt production

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.

*By Fábio Couto — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Petrobras to distribute R$43bn in dividends

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

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

https://valorinternational.globo.com/
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Petrobras may put sale of stake in Braskem on hold

With Lula da Silva’s victory, oil company is expected to analyze again plan to leave industry

11/03/2022

Petrobras may or may not exercise the right of preference to acquire the partner’s stake, sell its part or remain in the business — Foto: Edilson Dantas/Agência O Globo

Petrobras may or may not exercise the right of preference to acquire the partner’s stake, sell its part or remain in the business — Foto: Edilson Dantas/Agência O Globo

The sale of Petrobras’s stake in Braskem is uncertain after Luiz Inácio Lula da Silva (Workers’ Party, PT) won the presidential race, sources involved in the talks say. The state-owned oil company hired J.P. Morgan as an adviser last year, when Novonor, the company formerly known as Odebrecht, decided to sell its share.

With the sale of Novonor’s stake, Petrobras may or may not exercise the right of preference to acquire the partner’s stake, sell its part or remain in the business. Novonor, with 38.4% of the company’s capital, and Petrobras, with 36.15%, are part of the petrochemical company’s controlling group.

Sources told Valor that the state-owned company was willing to offload its stake for the right bid. However, with the victory of Mr. Lula da Silva, who has already said he is against privatizing more companies, the oil company is expected to reanalyze the idea of leaving the Brazilian petrochemical company.

Sources close to Mr. Lula da Silva’s campaign have begun to discuss the role of Petrobras in the new administration. They told Valor that the integration of refineries and petrochemical companies is a global trend. One source understands that the petrochemical industry is an important and profitable field that should be strategic for Petrobras. However, there is no definition yet on the sale of Petrobras’s stake in Braskem.

One of the biggest critics of Petrobras’s strategy of focusing on exploring oil in deep waters, and a historical advocate of the company’s stake in the petrochemical company, former Petrobras CEO José Sergio Gabrielli is in the group that advises the Workers’ Party regarding the future of the state-owned company. Mr. Gabrielli told Valor he sees synergies between refining and the petrochemical industry, but only the future administration can speak on Petrobras’s strategy for the sector.

Sources linked to Novonor’s creditor banks say that the Odebrecht family will have to get rid of the business, and Mr. Lula da Silva’s election does not change this situation. However, it is unclear whether potential buyers will maintain a bid covering only Novonor’s stake should Petrobras decide to remain in Braskem’s capital.

The company received a new proposal from the private-equity firm Apollo, which raised the bid to R$47 per share, but there are no formal talks underway, a person familiar with the matter said. The U.S.-based firm will do due diligence before moving forward with the deal, but sources say this is no longer a determining factor.

Apollo’s main concern is the petrochemical company’s assets in Alagoas. Although Braskem has advanced a lot in the talks with authorities about soil sinking in Maceió, the firm still sees risks, including from the financial standpoint. The amount provisioned to cover expenses with the geological problem, allegedly caused by Braskem’s activity there, totals R$12.9 billion so far.

In previous talks with Novonor, Apollo had imposed as mandatory the due diligence before making a formal bid. Now, the company will do the due diligence at its own risk, a source said. The company is said to be interested in Petrobras’s stake as well.

At this moment, there are no negotiations on the table, despite Apollo’s decision to raise its bid. Unipar’s bid for Braskem’s sliced assets in São Paulo has already expired, and the company is waiting for signals from Novonor on what will happen with the petrochemical company before presenting the same bid again or a new one. J&F is also potentially interested but has not presented a new bid.

According to sources, Novonor’s creditor banks showed no interest in Unipar’s bid. They hold about R$15 billion in debts converted into Braskem shares. On the other hand, Apollo’s bid is supported by part of this group. BTG Pactual left the negotiations, according to a source linked to the creditors. The debt-buying division of André Esteves’s bank had asked for a steep discount.

Some creditors believe that Braskem shares can recover in the future, but are skeptical of trading them on the stock exchange in the short term. The banks wait for a better bid, especially from foreign investors.

Novonor and Unipar declined to comment. Apollo and Petrobras did not immediately reply to requests for comment.

*By Mônica Scaramuzzo, Stella Fontes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Market forecasts strong quarter for Petrobras

Average revenue estimate of R$163.7bn represents 34.6% increase over 2021

10/31/2022

Analysts expect that state-owned company will maintain good cash generation in the quarter — Foto: Geraldo Falcão/Agência Petrobras

Analysts expect that state-owned company will maintain good cash generation in the quarter — Foto: Geraldo Falcão/Agência Petrobras

Oil prices and the exchange rate are expected to have a prominent role in the third-quarter earnings report Petrobras is set to release after the market closes on Thursday. Analysts also cite the greater use of refineries and falling imports of liquefied natural gas as important factors. The average of forecasts of three banks compiled by Valor suggests a net income of R$163.7 billion, which would mean a 34.6% year-over-year growth.

The analysts’ expectation is that the state-owned company will maintain good cash generation in the quarter and announce new dividend payments on Thursday. The projections of BTG Pactual, Goldman Sachs, and Itaú BBA for revenue vary between R$153.3 billion and R$177.89 billion.

On average, the three banks estimate an EBITDA of R$95.2 billion, which would represent a 15% increase over the third quarter of 2021.

“Despite reductions in oil prices and maintenance shutdowns at major refineries in the quarter, we expect Petrobras to announce solid results, with the high refinery utilization rate and increased sales compared to the previous quarter,” Itaú BBA analysts wrote in a report.

Petrobras is expected to report profits in the quarter. In the case of Itaú BBA, the state-owned company is seen as posting gains of R$41.84 billion. Goldman Sachs estimates that the company will earn R$45.56 billion, while BTG Pactual foresees gains of R$53.57 billion.

In dollars, UBS forecasts the company will post a $8 billion profit, while XP is a little more optimistic and estimates $8.2 billion. It is important to emphasize, however, that the profit may still suffer non-recurring effects, which are harder for banks to estimate.

As a comparison, in the third quarter of last year, the company posted a net profit of R$31.14 billion, while in the second quarter of 2022, the net profit was R$54.3 billion.

From July to September this year, the price of oil remained high in the international market, but lower than in the previous quarter, when there was greater impact from the war in Ukraine. According to Itaú BBA calculations, the Brent, the main international oil reference, had an average price of $98 per barrel in the third quarter.

The banks estimate that the state-owned company will pay more than $6 billion in dividends referring to the quarter’s results. Goldman Sachs points out that Petrobras can distribute up to $12 billion in dividends by the end of the year, without reducing the cash position to less than $9 billion.

According to the data released on Monday, Petrobras had an average production of 2.64 million barrels of oil equivalent per day (boe/day) in the third quarter, down 6.6% year-over-year. In relation to the immediately previous quarter, the drop was 0.3%.

One factor expected to contribute for the state-owned company to see better financial results in the annual comparison is the increase in rainfall. In 2021, Brazil faced a historic drought that affected hydroelectric generation and led the company to increase LNG imports to supply thermoelectric plants. This year, the scenario was reversed and LNG imports fell. Thus, according to XP, the gas and energy sector is expected to report good margins in the third quarter of 2022.

The release of Petrobras’s results on Thursday will be followed on Friday by two conference calls, one in English and another in Portuguese, and a press conference, in which the company’s executives will comment on the numbers.

XP stated, in a report, that investors will be alert to comments regarding signs of cost inflation in operations and updates on the sale of company assets, as well as possible talk about upcoming moves on dividends.

*By Gabriela Ruddy — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Petrobras hires again suppliers targeted by Car Wash task force

SBM, Camargo Corrêa and Nova Participações were reintegrated to oil company’s base

10/20/2022

Companies that provide services to Petrobras and that were excluded, as of 2014, from the register of suppliers for involvement in cases of corruption investigated by the anti-corruption task force Car Wash are returning to have commercial relations with the oil company, although not all of them are able to close contracts for the provision of goods and services. SBM, based in Monaco, Camargo Corrêa and Nova Participações, former Engevix, are among the companies reintegrated to the Petrobras supplier base, but they are in different situations.

SBM, for example, has a contract in place with Petrobras to deliver by 2023 a platform for the Mero field, in the Santos Basin. The contract, agreed in 2019, was SBM’s first with Petrobras after the Car-Wash allegations in which the company was accused of wrongdoings by the Federal Prosecution Service and had to sign a leniency agreement with the authorities. Leniency is a kind of plea bargaining for business entities that admit wrongdoing in government contracts.

From 2014 to 2021, Car Wash investigated irregularities committed by Petrobras’ suppliers and former employees. According to the latest available data, Petrobras had been reimbursed R$6.2 billion for the damage found in the investigations. Both the state-owned company and suppliers have undergone improvements in corporate governance policies.

SBM’s CEO, Bruno Chabas, says the episodes of corruption revealed have helped the company to reinvent itself: “It was part of our history and we have learned from it. We have become a different company, we are more transparent, and we are aware of our impact on society,” he said.

Camargo Corrêa was also reinstated, in 2020, to the list of Petrobras suppliers, but has not yet signed any contracts. Nova Participações, formerly Engevix, returned to the Petrobras supplier base, but is still considered high risk, a classification that prevents it from signing contracts with the oil company.

Part of the companies authorized for contracting by Petrobras did not close new deals as a result of the reduction of investments by the state-owned company in large infrastructure projects, say sources in the construction area. The Petrobras contracts for works involves long chains of suppliers. In 2021, the company closed R$239.85 billion in supply contracts for goods and services in Brazil and abroad with 9,751 companies, including platforms and other goods. In 2020, the state-owned company closed contracts worth R$253.3 billion with 10,335 suppliers.

Despite resuming relations with companies involved in Car-Wash, there are still 76 companies on Petrobras’ list that are suspended from bidding or on precautionary blockade.

This classification appeared in 2014 to deal with those investigated in the Car Wash task-force. Not all cases, however, are related to the corruption probe. Of the total of blockades, 62 correspond to decisions made as of 2021, the year in which the task force was closed.

Salvador Dahan — Foto: Divulgação/Vivian Fernandez

Salvador Dahan — Foto: Divulgação/Vivian Fernandez

Salvador Dahan, Petrobras’ Chief Governance & Compliance Officer, told Valor that the reasons for the current suspensions are diverse and range from problems in the corporate structure to failures in the integrity programs identified by the state-owned company: “Some [companies] may not have problems [of corruption], but do not have the foundations of a compliance program,” he said.

Among the companies still blocked by Petrobras that were involved in Car-Wash are Odebrecht Ambiental and Base Engenharia, formerly Schahin. Odebrecht Ambiental had its operational assets sold to BRK in 2017 and is now a non-operational company. Novonor, formerly Odebrecht, would not have sought to remove Odebrecht Ambiental from Petrobras’ blockade list because today the company is no longer part of the group’s operational assets. Base Engenharia was declared bankrupt in 2018.

Since 2015 Petrobras assigns an integrity risk level (GRI) to all companies with which it has a business relationship. The supplier evaluation process begins with the completion of a due diligence questionnaire, known as due diligence of integrity (IDD), with questions about the suitability and internal control programs of the companies. After this internal evaluation process, Petrobras defines the risk level of each company, which can be high, medium, or low. Low- and medium-grade companies are eligible to participate in bids to sign contracts.

“We do not want to associate our name and brand with companies that are committing violations, illegalities or that do not respect the same principles that we have. The goal is to protect Petrobras and its entire value chain,” said the state-owned company’s CEO. More than 80% of the companies in Petrobras’ supplier base, says Mr. Dahan, are considered low risk, while only 2% are still high risk. He says that 40% of the companies that at some point were identified as high risk by Petrobras were able to reverse the picture and become low or medium GRI, which allow them to participate in bids.

Nova Participações is one of the companies registered with Petrobras seeking to improve its GRI. According to the Federal Prosecution Service (MPF) in the Car-Wash task-force, the company was part of a scheme to pay bribes and form a cartel. The company closed a leniency agreement in 2019, in which it committed to pay R$516 million until 2047, for the losses generated, and also needed to undergo reorganization.

Adjair dos Santos, Nova Participações’ chief compliance officer, says the company hired an external consulting firm to map integrity risks in internal processes in 2017. Since then, a compliance area was set up, responsible for measuring actions and mitigating risks. In 2019, Nova Participações’ governance management was developed into an area that monitors the processes that occur within the company, which includes hiring, payments, and contract terminations. “All of this generated a transformation of people, of processes, of risk visualization,” he said.

Despite its efforts, Nova Participações has yet to close contracts with Petrobras. Today, the company provides services to private companies in the electrical sector, in the engineering of hydroelectric and solar generation plants and transmission lines. The company recently asked Petrobras for a reassessment of its risk rating. The expectation is that the GRI will fall to low or medium, according to Mr. Santos.

The risks identified in the anti-corruption task force led Petrobras to institute, in 2014, a public list of suppliers with whom it could not close new deals, in addition to strengthening surveillance mechanisms. In 2015, the state-owned company created a governance board. To be able to sign contracts with Petrobras again, suppliers had to implement improvements in internal controls to prevent and combat fraud and corruption.

The companies involved in the investigations were taken off the list of suppliers blocked by Petrobras as they signed leniency agreements with the MPF. This type of agreement, considered a kind of “rehabilitation” for business entities, allows companies involved in illicit practices to collaborate with investigations and take actions so that irregularities do not recur, in exchange for the easing of sanctions. Leniency agreements also involve payment of fines.

After the leniency agreements, Petrobras allowed the companies to take part in the bids, but the reinstatement was different for each supplier. Today, among the criteria for a company to be among those qualified to participate in Petrobras’ bids is the guarantee that the senior management has no executives involved in scandals, in addition to the existence of an independent board of directors. The development of more robust governance areas is one of the factors that allowed the suppliers to return to Petrobras’ suppliers base.

Emilia Malacarne, a lawyer from law firm Souto Correa’s compliance area, states that the purpose of a compliance program is the prevention and detection of frauds, illicit acts and irregularities, as well as the remediation of a problem, when detected. She points out that it is important for the company to apply these policies in day-to-day activities. “Compliance is a culture change, done through mechanisms. But it is necessary that the company shows, on a day-to-day basis, that these values have a practical effect.”

*By Gabriela Ruddy — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Petrobras unlikely to draw buyers for refineries

Just three months ahead of presidential elections, potential investors do not believe that sale process will be concluded this year

07/14/2022

Petrobras resumed sales of three refineries in June — Foto: Divulgação Petrobras/Diego Pisante

Petrobras resumed sales of three refineries in June — Foto: Divulgação Petrobras/Diego Pisante

The sales of three Petrobras refineries may not be competitive, sources say. The oil company starts receiving non-binding proposals as of this Thursday for three units: Abreu e Lima (Rnest), in Pernambuco, Presidente Getúlio Vargas (Repar), in Paraná, and Alberto Pasqualini (Refap), in Rio Grande do Sul. The move includes logistics assets integrated into these facilities.

Just three months ahead of the presidential elections, potential investors do not believe that the sale will be concluded this year. Petrobras is being advised by Citi. Sources within the oil company said the deal is unlikely to be concluded by October.

As former president Luiz Inácio Lula da Silva leads the polls, the concern is that the sale of assets may be interrupted if he wins the presidential race. According to Mr. Lula da Silva’s government plan, he is against the privatization of Petrobras.

Even in a scenario in which incumbent Jair Bolsonaro (Liberal Party) is reelected, potential buyers don’t feel safe either, said on condition of anonymity one businessman who is still evaluating whether to bid for one of the units. “All these moves of the president concerning the change of command at Petrobras and trying to intervene in the price policy make investors feel insecure,” he said.

According to sources, Ultra, owner of the Ipiranga gas station chain, does not intend to bid for Petrobras. The group had once advanced in the process of buying the Refap unit, in Rio Grande do Sul. However, in October last year, the two parties announced that the negotiations had fell apart. The purchase of Refap would be strategic for Ultra in the oil and gas industry. Sources say that Petrobras tried to renegotiate a higher price for the refinery, higher than the group’s previous bid.

The Cosan group, a producer of bioethanol, sugar, and energy, is still evaluating whether to make an offer. Last year, it made a bid for Repar, but it fell short of the oil company’s intentions to sell. Sovereign wealth fund Mubadala, the owner of the Mataripe unit (formerly Landulpho Alves), is not interested in making an offer for one of the units in the South region either, sources say.

The sale of the refineries is part of the agreement signed in 2019 between the oil company and the antitrust regulator CADE for the sale of eight units, so to attract other companies to the industry. The assets for sale account for about half of the state-owned company’s processing capacity.

So far, only the sale of the Bahia refinery has been concluded. Petrobras has already signed contracts for units SIX, in Paraná, and Reman, in Amazonas, but the deals have not been closed yet.

The unsuccessful sale process of Rnest was terminated in August 2021, after the interested parties gave up submitting binding proposals. As a result, Petrobras opted to include in the business plan the conclusion of the project’s second refining train, with planned investments of $1 billion. According to the company, the intention is to broaden the interest of potential buyers.

According to a specialist in the oil and gas industry, Petrobras took too long to take the sale process ahead. For him, CADE should have put more pressure. “Now it has lost the timing. The price [intervention] still weighs.”

This source understands that this sale process does not favor competition, since the refineries in São Paulo and Rio de Janeiro were left out of the Petrobras divestment process. “If the idea is to foster competition, CADE should include refineries from those states. But Petrobras does not want to give up its best assets.”

In a note, Petrobras stressed its commitment to the broad transparency of its divestment projects and portfolio management and said that the subsequent stages of the project will be disclosed in due course. Cosan and Ultra declined to comment. Mubadala did not immediately reply to a request for comment.

*By Mônica Scaramuzzo, Gabriela Ruddy — São Paulo, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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