Petrobras Reports Biggest Loss As Oil Prices Decline Calling For Writedowns

Petrobras Oil

Brazil’s biggest company and largest investor has been cutting back on spending and laying off thousands of workers pushing the country deeper down into its worst recession in years.

Brazil’s leading, state-controlled oil company Petróleo Brasileiro SA (Pertobras) reported its largest ever fourth quarter loss on Monday in the wake of the global oil price decline and a problematic refinery project.

Petrobras reported, in a securities filing, a consolidated quarterly net loss of 36.9 billion reais (£7.09 billion) while it is still wrapped up in a corruption scandal in Brazil.

The previous year saw the company post a loss of 26.6 billion reias, this loss then jumped up further by 48 per cent resulting in the company’s 2015 financial results, which were positive through till September, turning into a full-year loss.

Chief Executive Officer, Almir Bendine said that for the second year in a row, Petrobras will not be paying dividends to its investors and that there will be no bonuses given out to its employees.

The huge deficit caught both analysts and investors by surprise when it was released, as the expected loss in the worst case was estimated to come in at 9.7 billion reais. The oil producer’s share price dropped by 5.5 per cent on the news in after-hour trading, in New York.

Petrobras says that it is in the red due to a 46 per cent decline in the prices of commodity benchmark, Brent crude oil LCOc1. The poor performance was not confined to Petrobras however, the global oil industry as a whole has been forced to declare losses and reduce nominal values of their assets.

83 per cent of the 46.4 billion reais in write-offs in the last quarter was from Petrobras oil fields. The previous year Petrobras also had to writedown their assets due to losses caused by price-fixing, bribery and political kickbacks. The scandal prompted demands for the impeachment of President Dilma Rousseff.

The then chairwoman from the time period between 2003 and 2010 was Rousseff who denied all allegations that corruption was taking place at the company.

With Brazil still in recession, Petrobras’ failure to pull up its performance will spell more problems for the country. Also Brazil’s biggest company and largest investor has also been cutting back on spending and laying off thousands of workers pushing the country deeper down into its worst recession in years.

The company’s net sales ran up to a total of 85.1 billion reais, but the adjusted value for earnings before interest, tax, depreciation and amortization brings the earnings to just 17.1 billion reais.

However, the results of its final quarter of 2015 saw it bring in a loss of 34.8 billion reais.

Petrobras, however, has improved its liquidity by increasing its cash position to 97.8 billion reais, up from 44.2 billion the previous year, as it slashed investments. The increased cash gives the company more of a cushion to pay its 492.8 billion reais ($126.2 billion) debt at the end of the quarter.

On Monday, Bendine said that the company will be able to generate enough cash to pay its debts until 2017, even without raising new capital and even if the company fails to sell its planned assets, worth $14 billion, he is confident that Petrobras can get through its slump:

“Even if we hit a road-bump we have sufficient cash through 2017… This doesn’t mean if we have good opportunities to raise cash or lengthen maturities we won’t do it.”

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