On Feb 25, 2014, Brazil's state-run energy giant, Petroleo Brasileiro S.A., or Petrobras (PBR), announced fourth-quarter 2013 profit of $2,760.0 million, significantly lower than $3,763.0 million earned in the year-earlier quarter. Earnings per ADR came in at 42 cents (1 ADR = 2 shares), as against the year-ago profit of 58 cents. Lower output hampered the results.
However, the company’s per ADR profits came ahead of the Zacks Consensus Estimate of 35 cents, owing to significant fall in exploration expenses along with reduced refining expenses.
Following the quarterly numbers, which were released after the closing bell on Tuesday, Petrobras ADRs closed down 2.3% at $11.07 on the NYSE trade on Wednesday.
Petrobras’ net operating revenue of $35,593.0 million was slightly below the year-earlier level of $35,660.0 million. Lower realized oil prices in both the domestic and the international market affected the results.
For the year ended Dec 31, 2013, Petrobras reported income of $1.70 per share, in-line with the year-ago profit. Revenues were recorded at $141.5 billion against the year-ago number of $144.1 billion.
Segmental Performance
Upstream: Petrobras’ total oil and gas production during the fourth quarter reached 2,534 thousand barrels per day (MBbl/d), down from 2,614 MBbl/d recorded in the year-ago quarter.
Compared with the Oct-Dec quarter of 2012, the company’s Brazilian oil and natural gas production decreased 1.6% to 2,340 MBbl/d, while international production came in at 194 MBbl/d (as against 236 MBbl/d in the corresponding period last year).
During the fourth quarter of 2013, the average sales price of oil in Brazil decreased 3.6% from the year-earlier period to $96.92 per barrel. Average sales price of international oil was down 7.5% year over year, to $86.43 per barrel. Additionally, domestic natural gas price was down 3.0%.
These factors hampered the upstream (or exploration & production) segment‘s profit by 8.6% to $7,840.0 million.
To some extent, the downside was arrested by a 26.7% dip in Petrobras’ exploration costs, which totaled $766.0 million. Moreover, average international natural gas sales price rose 57.3% from the fourth quarter of 2012.
Cost per barrel (or cost to produce each barrel of oil) moved up 3.8% in Brazil to $14.33, while overseas costs rose 16.5% to $11.72.
Downstream: During the fourth quarter, Petrobras’ downstream unit incurred a net loss of $3,613.0 million, narrower than the loss of $4,185.0 million a year ago. Petrobras was able to cut its losses on account of the recent decision by the Brazilian government to allow it to raise diesel and gasoline prices.
Refining costs per barrel in Brazil were down 14.5% to $2.88. Internationally, it fell 7.1% to $4.44. Petrobras imported an average of 780 MBbl/d, lower (by 3.2%) compared to the same period last year. In particular, oil product imports were 15.6% less than the year-earlier period, favorably impacting gross margins.
Capital Spending & Balance Sheet
During the three months ended Dec 31, 2013, Petrobras’ capital investments and expenditures totaled $15,441.0 million. At the end of the quarter, the company had cash and cash equivalents of $15,868.0 million and net debt of $94,579.0 million. Net debt-to-capitalization ratio was approximately 39%.
Strategic & Management Plan
Petrobras has revealed its 2030 Strategic Plan. The plan discloses the company’s willingness to place itself among the top five integrated oil firms in the world by 2030. To support the plan, management has decided to invest roughly $220.6 billion through 2014-2018. Petrobras added that 70.0% of the projected amount will likely be spent on exploration and production activities. However, the recent investment amount of $220.6 billion is lower than $237.0 billion sanctioned by management in the five-year span of 2013–2017.
Petrobras added that it intends to produce oil at a rate of 4.2 million barrels of oil per day (MMBBL/D) by 2020 in Brazil. Moreover, Petrobras believes that by 2020, its total liquid and gas production capacity in the domestic market will likely be 5.2 million barrels of oil equivalent per day (MMBOE/D).
Zacks Rank & Stock Picks
Petrobras currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Patterson-UTI Energy Inc. (PTEN), Helmerich & Payne Inc. (HP) and Warren Resources Inc. (WRES). All the stocks sport a Zacks Rank #1 (Strong Buy).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment