Petrobras Profit Slump Defies Outlook

Analyst average estimate nearly 8 times bigger than result; Market-focused board is on course independent of govt.

Brazilian state-led oil company Petroleo Brasileiro SA said its second-quarter net income plunged 89 percent after a one-time charge for underperforming assets that caught analysts off guard.

The 1.28-billion-real charge was taken as Petrobras' new executives and board of directors try to control the company's $132 billion debt, the oil-industry's largest, by preparing up to $15.1 billion of assets for sale by the end of 2016.

The company also showed unexpected speed in casting off under-performing projects, some of which have been criticized as offering more political return to Brazil's ruling coalition than to Petrobras' bottom line.

"This wouldn't have happened under old management," said Deyvid Bacelar, who represents Petrobras workers on the board. "I'm still trying to understand; I don't know why the board moved so fast, some of the impaired projects have social and economic benefits that could have been saved if the board was ready to negotiate."

The company's historic $17 billion April writedown in the wake of a price-fixing, bribery and political kickback scandal had faced resistance from the previous board. Yet in the face of lawsuits and investor outcry, the government replaced politicians and generals in its controlling board bloc with market professionals.

Bacelar, a member of the FUP oilworkers federation, a major backer of Brazilian President Dilma Rousseff's Workers' Party-led government, said the writedowns could ease the path for asset sales, a move he and FUP strongly oppose.

"Most board members have been appointed by the government but they all serve the market now," Bacelar said. "As a defender of Petrobras' social mission, I'm all alone."

Petrobras' quarterly profit fell to 531 million reais ($150.4 million) from 4.96 billion reais a year ago, the company said in a securities filing on Thursday. The write-offs were so unexpected that the average profit estimate of 12 analysts polled by Reuters, 4 billion reais, was nearly eight times bigger than the actual result.

The 1.28-billion-real impairment charge related to the cancellation of new projects in its gas and energy, refining, and exploration and production units. Petrobras also took an unexpected 1.6 billion real charge to resolve a tax issue with Brazil's federal government.

Chief Executive Aldemir Bendine, who took the helm in February, has said he wants to clean up a balance sheet in the wake of corruption and a plunge in the price of oil.

"We want to leave the company in a situation where it has the highest levels of management in the world," Bendine told reporters at the company's headquarters in Rio de Janeiro late Thursday. "We want the company to go forward with its liabilities and the challenges it faces cleaned up."

Considering the need to take the impairment and tax charges, Bendine said the company's profit, one of the smallest in recent years, "was great."

Petrobras reported net sales, after taxes, of 79.9 billion reais and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of 19.8 billion reais, the company said.


By Jeb Blount, Marta Nogueira and Rodrigo Viga Gaier