What Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) Could Have Done Differently?

Posted by Lynn Eisler October 27, 2013 0 Comment 1798 views

On Friday, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), Brazil’s state-operated oil company said that there was a 39% drop in its quarterly revenue in comparison to the previous year. This dip has been attributed to the increase in administrative and exploration expenses. On the other hand, revenue took a hit due to the dismal production growth and fuel subsidies.

Debt levels

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) said that in the quarter that ended 30 September, the net income was 3.40B reais which fell below the average analysts’ estimates of 5.84B reais ($2.68 billion). Maria das Gracas Foster, the company’s Chief Executive officer said that there has been a spilt in the market & domestic fuel-prices at a point of time when the demand has been strong. However, the company’s expenses have also been higher in the sub-commercial and dry wells. He said that in the coming months, they plan on pulling-down their debt levels.

The company’s majority stakeholder is the Brazilian government and the company has been struggling to keep up with the very competing goals that have been set by it. Even as Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is pushed by the government to increase investment and spending to bolster oil taxes and create jobs, it has also not permitted the company to sell diesel and gasoline at the prevailing market prices. This is their way of keeping a rein on inflation.

With production and revenue at a plateau, the company has been compelled to hike borrowing to finance in its $237B, 5-year investment plan. Incidentally, this is the largest corporate spending program in the world.

There was a 35% rise to 250.9B reais ($112.5 billion), in total debt,  in the 12 months that ended 31 Sept and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) has recently agreed to pay 40% of the almost $100B that is required  to develop the massive Libra offshore oil- area.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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