Record Loss For Petrobras As Political And Economic Crisis Worsen
Petrobras reported a record loss for the fourth quarter, a horrendous performance that raises questions about the company’s ability to handle its mountain of debt.
The state-owned Brazilian oil company announced that it lost more than 36 billion reais in the fourth quarter, or more than USD$10 billion, a 40 percent increase compared to the fourth quarter of 2014. The losses were all the more staggering because the previous year’s figures were inflated due to the massive corruption scandal, which continues to bedevil the company.
The problem for Petrobras is that it has the world’s largest pile of debt, bigger than any other oil company. And that debt, much of which is priced in U.S. dollars, is becoming more expensive to service, particularly since the Brazilian real has depreciated significantly over the past year. As The Wall Street Journal notes, Petrobras’ debt has jumped to just about 800 billion reais, or about 10 percent higher than at the end of 2015, despite spending cuts.
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Petrobras previously announced plans to sell off USD$15 billion in assets, but has struggled to find buyers.
The results were vastly worse than the market expected. A Reuters survey beforehand found that even the most pessimistic estimates only predicted a loss of 9.7 billion reais for the quarter. Petrobras also wrote off 46.4 billion reais in impairment charges, 83 percent of which was connected to upstream oil assets. That came as falling oil prices pushed some deposits out of reach, forcing write-downs.
Petrobras also wrote off 5.28 billion reais related to a large refinery in Rio de Janeiro that has yet to be completed due to insufficient funding. Even after spending USD$14 billion on the refinery, it may not be completed until 2023. This year will mark the second year in a row that Petrobras does not pay any dividends to both private and government shareholders.
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