Despite a 1.5 Billion Real Loss, Petrobras Reported Surprisingly Good Results in the Third Quarter

Credit Suisse Stated That Petrobras’ Results, Released Last Night, Were Surprisingly Good, Converting US$ 5.5 Billion of Net Debt into Equity.

Yesterday (10/28), Petrobras disclosed operational and financial results for the third quarter of 2020 in a relevant fact. Although the state-owned company reported a loss of R$ 1.55 billion, the loss was 43% lower than the second quarter, and according to Credit Suisse, Petrobras’ results were surprisingly good. Petrobras Has Government Approval to Import Gas from Bolivia

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Compared to the same period in 2019, which was R$ 9.09 billion, the current result of the state-owned company was from bad to worse. However, the company reported that the recurring result was a profit of R$ 3.17 billion. In other words, the loss was explained by non-recurring financial and exchange expenses.

The resumption of pre-payments led Petrobras to reduce its gross debt by US$ 11.6 billion in the third quarter. “In the last 21 months, we have reduced US$ 31.3 billion in debt — about US$ 1.5 billion per month — a key factor for our company as it contributes to reducing the risk of our balance sheet, strengthening our resilience to cash flow volatility, and freeing up resources to invest in our world-class assets,” said Petrobras President Roberto Castello Branco. Even with this significant reduction in indebtedness, the company maintained a solid cash position of US$ 13.4 billion.

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Credit Suisse stated that Petrobras’ results, released last night, were surprisingly good, well above the bank’s expectations, which were not low, especially highlighted by cash generation, converting US$ 5.5 billion of net debt into equity.

“In our opinion, this was a particularly impressive feat, given the profound impact that covid-19 has had on the oil industry. Markets are now fearing new lockdowns due to a second wave, especially in Europe. However, if macro conditions allow, we expect a positive market reaction,” says the report.

Operational Results of Petrobras

The higher sales of oil and derivatives both to the external and internal markets positively affected the exploration and production (E&P) and refining segments.

Petrobras’ total oil and gas production grew 5% compared to the previous quarter, with a highlight on the increase in production from the pre-salt. As a result, the company projects to exceed the originally defined target for the year, which was 2.7 million barrels of oil equivalent per day (boed). The new target is set at 2.84 million boed, with a variation of +/- 1.5%.

This impressive operational performance was due to the increase in production capacity in Búzios and high operational efficiency in the pre-salt, as well as the postponement of some of the major planned production stoppages.

In the refining segment, Petrobras also improved its results compared to previous quarters. The utilization factor of the refineries exceeded expectations and closed the quarter at 83%, after reaching 70% in the second quarter. There was also a progressive increase in exports, with a new record of oil exports registered in September (1.066 million barrels per day).

The total cash inflow of Petrobras from asset sales reached US$ 1 billion in the first nine months of the year. There are still ten operations to be completed by the end of the year and another 39 divestment projects underway.

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