The Brazilian State Oil Company Petrobras Reported Its Highest Quarterly Profit on Thursday, Easily Surpassing Analysts’ Estimates, Thanks Largely to Billions of Reais in Asset Sales.
In a record release, Petrobras, as the company is known, said that its net income for the second quarter was 18.87 billion reais (US $ 4.92 billion). This was well above the Refinitiv consensus estimate of 8.06 billion reais at current exchange rates.
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Adjusted for non-recurring items, the net income would have reached 5.2 billion reais, said CEO Roberto Castello Branco in written comments accompanying the results.
The earnings before interest, taxes, depreciation, and amortization (EBITDA), a closely watched indicator, given the many losses and one-time gains of Petrobras in recent years, hit market estimates. Petrobras reported that EBITDA reached 32.67 billion reais, almost exactly in line with Refinitiv’s estimate of 32.7 billion.
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Overall, the results show that Petrobras’ recent acceleration in asset sales is bearing tangible fruit. Castello Branco, who took office in January, made the sale of non-core assets to reduce debt a key part of his overall strategy, a tactic that has been praised by investors.
In total, in 2019, the company raised about US $ 12.764 billion from asset sales, including US $ 8.722 billion from its sale of pipelines to French company Engie SA in the second quarter, according to the document.
Largely as a result of these sales, Petrobras’ net debt to EBITDA ratio fell to 2.69 at the end of the second quarter, down from 3.19 at the end of the first quarter. Petrobras’ current goal is to reduce this ratio to 1.5 in 2020.
In Castello Branco’s comments, the CEO attributed much of the profit increase to factors “beyond Petrobras’ control,” such as high oil prices </ LCOc1> and an improvement in the real to dollar exchange rate.
Castello Branco also reaffirmed the company’s commitment to asset sales, stating that the so-called “initial teaser phase” for four refineries worth billions of dollars is set to launch next month.
He added in the comments that “we do not need to own” midstream assets. Earlier on Thursday, Reuters reported that Petrobras was studying a mass transfer of Transpetro employees, which is responsible for most of the company’s midstream assets.
The company would seek to partially and fully reduce its 37.5% stake in fuel distribution unit Petrobras Distribuidora SA, which was privatized through a stock offering in July, he stated.
A potential concern in the results was a significant downward revision in the 2019 investment forecast, from US $ 16 billion to US $ 10- $ 11 billion. Castello Branco said the number does not include bids for offshore exploration and production blocks in Brazil, scheduled for later this year. Source: Reuters

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