Petrobras Profits: Should We Demonize or Celebrate?

Recently, Petrobras reached 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 highest quarterly earnings in its history: R$ 44.5 billion. This result was much higher than the same period in 2021 (R$ 1.2 billion).

Of all the profit earned during this period, the Union will receive approximately R$ 14 billion, amounts that virtually benefited infrastructure, educational, security, among other projects. However, given a scenario of financial difficulties among Brazilians, with inflation being pushed up largely due to fuel prices and the discrediting of politics, should we celebrate or demonize these results?

As long as fuel prices remain high, it will be difficult to find anyone who says that Petrobras’ profits have concrete benefits for Brazilians. Moreover, the presidential pre-candidates have increased their tone in criticizing the state-owned company and its earnings, even though the Union is the main shareholder.

Recomendado para você

Oil and Gas

Major Oil, Gas, and Energy Event Will Take Place in Brazil: Macaé Energy Will Gather Petrobras, Equinor, Prio, Among Other Suppliers and Energy Executives for Business, Networking, and Employment Opportunities

The Technical Agenda and the Fair in the City of Macaé Should Boost Discussions on Investments, Energy Transition, and Development of the Oil, Gas, and Energy Chain in the National...

Paulo Nogueira

1

President Jair Bolsonaro (PL) classified, during a live broadcast on social media, the profits of Petrobras as “rape” and further stated that the state-owned company “can no longer increase fuel prices, that is a crime.”

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

On his official website, Lula also pointed out international shareholders as the only beneficiaries of Petrobras’ profits and repeated what he refers to as “Brazilianizing” the company’s pricing policy, which does not concern itself with the rising cost of living and makes life much more difficult for Brazilians.

5 Reasons That Caused Petrobras’ Profits to Skyrocket

1. Overvaluation of Oil in the “Post-Pandemic”: In the first quarter of 2022, the price of oil rose 66% in the global market compared to the same period last year. The increase was further accelerated after the war in Ukraine, because Russia, which is the second largest exporter and third largest producer of oil globally, accounting for about 12% of global supply, has been suffering economic sanctions. Due to the pricing policy based on international prices, Petrobras passes these increases on to Brazilians.
2. Production Costs X Diesel Selling Price: Price increases have raised the difference between production costs of diesel and the fuel selling price. In March, Petrobras implemented the largest adjustment since January 2021 (24.9% for S-10 diesel at refineries). The difference favors Petrobras’ earnings, especially since 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 per barrel, while the selling price was US$ 101.40 in the quarter. The company increased its production in the quarter by another 1% and exported 55% more compared to the first quarter of 2021.
4. Fall of the Dollar: The dollar fell 15% in the first quarter, contributing to Petrobras’ profit as it helped reduce the company’s debts and other liabilities.
5. Financial Investments: Petrobras increased the amount of money on hand in the first quarter due to increased sales. Therefore, the use of these resources in the financial market brought more profits. A large 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.

High Oil Prices Should Keep Petrobras’ Profits Up in the Coming Months

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

What is seen is that oil prices continue to rise, even with demand exceeding supply. The reason still has to do with the European Union’s sanctions on Russia regarding the supply of certain types of fuels.

According to the head of CM Capital’s Expert Panel, Nicolas Silvas, even with the Organization of the Petroleum Exporting Countries and allies (OPEC+) plan to maintain small increases in oil production, the decline in inventories is likely to lead to a rise in prices.

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