Petrobras Second-Quarter Profit Rises 32% as Crude Oil Surges to Record

Petroleo Brasileiro SA (PETR4), Brazil’s state-controlled oil producer, posted a better-than-expected 32 percent rise in quarterly profit after oil prices surged and it accelerated drilling at its largest offshore crude discoveries.

Second-quarter net income gained to 10.9 billion reais ($6.86 billion), or 84 centavos a share, from 8.3 billion reais, or 95 centavos, a year earlier, Rio de Janeiro-based Petrobras said yesterday. The company was expected to post profit of 83 centavos on an adjusted basis, the average of five analysts in a Bloomberg survey. Earnings on a per-share basis fell after the company sold about $70 billion of shares in September.

Petrobras is investing $224.7 billion over five years to develop deepwater fields and ramp up output at Lula, the largest discovery in Brazil’s history. The company disclosed several “relevant” findings in the quarter as it seeks to boost production from discoveries located deep underneath the seabed.

“We’re going to accelerate the number of wells drilled this year,” Chief Financial Officer Almir Barbassa said late yesterday at a press conference in Rio de Janeiro. “We’re expecting to receive a large number of rigs.”

Crude prices rose above $125 a barrel for the first time in 2 1/2 years in the quarter, helping to fuel a 15 percent gain in sales to 61.5 billion reais. Output rose 0.4 percent after offshore platform maintenance slowed its production growth.

“Prices were quite good during the entire quarter, but production wasn’t that good,” Andres Kikuchi, an analyst at Link Investimentos in Sao Paulo, said in a telephone interview before the results were released.
‘Instability’

Petrobras also posted a financial gain of 2.9 billion reais, compared with a loss of 630 million reais in the year- earlier period, after a stronger local currency reduced the value of the company’s dollar-denominated debt.

The company said it still sees “instability” in global markets, although the impact on the company is limited because its operations are concentrated in Brazil.

“If we have a double dip, it will contaminate developing countries and oil demand,” Barbassa said. “We’re prepared for a scenario of lower oil prices.”

Petrobras, worth about 291 billion reais at the end of trading yesterday, has lost 23 percent this year in Sao Paulo. Of the 20 analysts who rate the company and tracked by Bloomberg, 13 recommend buying the stock and seven say “hold.”
New Oil Reserves

Petrobras trails Exxon Mobil Corp., PetroChina Co., Royal Dutch Shell Plc and Chevron Corp. in market value.

The company revised its $224.7 billion investment plan this year to include $12.4 billion for the development of new oil reserves it bought from the government as part of its $70 billion share sale, the largest in history. The company acquired the right to develop about 5 billion barrels of oil.

Petrobras will need to raise as much as $91 billion of debt in the next five years to cover investments and debt payments.

In addition to developing the Lula field, Petrobras may take a minimum stake of 30 percent in the government’s Libra deposit. Lula and Libra are the Americas’ biggest oil discoveries since Mexico’s Cantarell in 1976. The fields are in a deep-water region known as the pre-salt along Brazil’s coast.

Petrobras rose 69 centavos, or 3.4 percent, to 20.99 reais in Sao Paulo trading yesterday. The earnings report was released after the end of regular trading.