Petrobras earnings: should we demonize or celebrate?

Junior Aguiar
08-05-2022 06:52:13
in Economics, Business and Politics
Petrobras has huge profits Oil high should keep Petrobras profits in coming months | Image: Investnews via Google

Recently, Petrobras reached the first place among Brazilian companies with the highest profits, becoming the most valuable company not only in the country, but also in all of South America. This week, the state-owned company announced the biggest quarterly gain in the company's history: R$ 44.5 billion. This result was much higher than the same period in 2021 (R$ 1.2 billion).

From all profits collected in this period, the Union will receive approximately R$ 14 billion, amounts that virtually benefited infrastructure, educational, security projects, among others. However, faced with a scenario of financial difficulties among Brazilians, with the inflation being pulled up a lot due to fuel prices and the discrediting of politics, should we celebrate or demonize these results?

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As long as oil-derived fuel prices are high, it will be difficult to find anyone who says that Petrobras' profits have concrete benefits for Brazilians. Furthermore, the pre-candidates for the presidency of the Republic have raised their tone when criticizing the state-owned company and its gains, even though the Union is the main shareholder.

President Jair Bolsonaro (PL) classified, during a live broadcast on social media, that Petrobras' profits as a "rape" and also said that the state company "can no longer increase the price of fuel, this is a crime".

In an interview with Sarandi radio, in Rio Grande do Sul, Ciro Gomes said that Petrobras is plundering the Brazilian people and that part of the profits disclosed will go to minority shareholders, who are bankers in Brazil and abroad.

On his official website, Lula also pointed to international shareholders as the only beneficiaries of Petrobras' profits and repeated what he calls "Brazilianizing" the state-owned company's pricing policy, which is not concerned with the fact that it raises the cost of living and makes the life of the Brazilian much more difficult.

5 reasons that made Petrobras profits soar

  1. Oil overvaluation in the “post-pandemic“: In the first quarter of 2022, the price of oil rose 66% on the world market compared to the same period last year. The rise was further accelerated after the war in ukraine, because Russia, which is the second largest exporter and third largest producer of global oil, accounting for about 12% of global supply, has been suffering economic sanctions. Due to the pricing policy based on the international price, Petrobras passes on these increases to Brazilians.
  2. Production cost X diesel selling price: Price increases have increased the difference between the cost of producing diesel and the selling price of the fuel. In March, Petrobras carried out the biggest readjustment since January 2021 (24.9% of S-10 diesel at refineries). The difference favors Petrobras' gains, not least because diesel accounted for 48% of the state-owned company's sales revenue in the first quarter.
  3. More production and more sales abroad: Petrobras extracts oil from the pre-salt at a cost of US$ 6 a barrel, with the sale price being US$ 101.40 in the quarter. The company increased production in the quarter by another 1%, and exported 55% more than in the first quarter of 2021.
  4. Dollar fall: The dollar dropped 15% in the first quarter, contributing to Petrobras' profit as it helped reduce the company's debt and other liabilities.
  5. Financial investments: Petrobras increased the amount of cash on hand in the first quarter due to the increase in sales. Therefore, the application of these resources in the financial market brought more profits. A good part of these gains is related to the increase in the Selic interest rate, which reached 11.75% per year at the end of the first quarter.

Oil high should keep Petrobras profits in coming months

The trend is that Petrobras and other companies in the sector with shares on the stock market will continue to show good profits in the coming quarters.

What is seen is that oil prices continue to rise, including demand that exceeds supply. The reason still has to do with the European Union's sanctions on Russia regarding the supply of some types of fuel.

According to the head of the Expert Table at CM Capital, Nicolas Silvas, even with the Organization of Petroleum Exporting Countries and allies (OPEC+) plan to maintain small increases in oil production, the drop in inventories tends to lead to a rise in prices.

Other specialists also believe that in the coming months the values of the Brent oil should remain above US$ 100. Another favorable factor for Petrobras would be the payment of dividends. The state-owned company will advance earnings for the quarter of R$ 3.17 per share to shareholders who were in the company's database until May 23. Thus, investors will feel motivated.

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Junior Aguiar
Journalist, graduated from the Catholic University of Pernambuco | Web content producer, analyst, strategist and communication enthusiast.