Home » Posts tagged 'petrobras'

Tag Archives: petrobras

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Petrobras Expects Permanent Damage to Oil Demand as It Writes Off Billions In As

May 15, 2020

Petrobras Expects Permanent Damage to Oil Demand as It Writes Off Billions In As

Petrobras has warned its shareholders that the coronavirus pandemic could leave a permanent mark on the global economy, including on consumer behaviors, as it reported a first-quarter loss and massive writeoffs on assets that have stopped being economical.

The company booked a $9.7 billion net loss for the first quarter, down from a profit of $1.98 billion a quarter earlier, mostly on an impairment charge of $13.4 billion related to shallow- and deepwater assets.

“The assets that had their values adjusted are mostly oil fields in shallow and deep waters, whose investment decision was made in the past and based on more optimistic expectations for long-term prices,” Petrobras said. “We are not surprised by its devaluation in a more challenging environment.”

The company noted that it has yet to feel the pandemic’s economic effects on its financial results, which it expects to happen in the current and subsequent quarters. For now, its free cash flow is strong, Petrobras said, and so is its overall position.Related: Goldman Sachs: Oil Market Headed For Deficit In June

The outlook for the future is not optimistic, however. The Brazilian company expects Brent prices to average just $25 a barrel this year and the rise by some $5 a barrel annually to reach $50 in 2025. This is an extremely unfavorable scenario for most oil producers.

But besides prices, Petrobras also said it expected permanent changes in consumer habits, resulting from the economic shock caused by the pandemic on a global scale. This reference to changed habits may imply changes in energy use and hence oil demand that would have a long-term effect on the industry.

Petrobras expects the overhang in global oil inventories to persist, with rebalancing taking a while, the company also said, noting that “oil consuming industries, given the new scenario, will not keep their previously projected demands in the long-term, reducing consumption levels.”

Record Loss For Petrobras As Political And Economic Crisis Worsen

March 23, 2016

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.

(Click to enlarge)

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.

…click on the above link to read the rest of the article…

The Big-Oil Bailouts Begin

January 31, 2016

The Big-Oil Bailouts Begin

The hundred-billion-dollar question.

Despite a bounce this week, low oil prices continue to sow fear, uncertainty, and mayhem across the emerging market complex. On Wednesday, it was leaked that the IMF and World Bank would dispatch a team to oil and gas-dependent Azerbaijan to negotiatea possible $4 billion emergency loan package in what threatens to become the first of a series of global bailouts stemming from the tumbling oil price.

In Latin America’s largest economy, Brazil, the government has refused to rule out bailing out Petrobras, once the jewel of the nation’s crown but now a scandal-mired shadow of its former self, weighed down by $127 billion in debt, most of it denominated in dollars and euros.

If it is unable to sell the $15 billion in assets it has targeted by the end of this year – a big IF given how the prices of oil and gas assets have deteriorated – Petrobras might need some serious help from Brazil’s Treasury. According to Citi, that help could reach $21 billion – just enough to plug the company’s cash hole and fix the capital structure on a sustainable basis. That’s a big payment for a government that has on its hands a widening budget gap, a 4% economic contraction, and double-digit inflation.

Brazil is not the only Latin American economy entertaining a bailout of its national oil company. The government of Mexico just announced that it quietly injected 50 billion pesos ($2.7 billion) of public funds into the coffers of state-owned oil company Pemex.

The timing of the announcement could not have been more convenient, coming just a day before Pemex was due to launch a $5-billion bond issue, which was predictably gobbled up by investors. In all likelihood, it will be the first installment of what could end up being a very large, very costly bailout of Mexico’s oil sector. Pemex is the world’s second largest non-publicly listed company, with $416 billion in assets. But things are looking decidedly grim.

…click on the above link to read the rest of the article…

Is Glencore The Next Lehman? The World’s Largest Commodities Trading Company Is Toast

September 29, 2015

Is Glencore The Next Lehman? The World’s Largest Commodities Trading Company Is Toast

Toast - Public DomainAre we about to witness the most important global financial event since the collapse of Lehman Brothers in 2008?  Glencore has been known as the largest commodities trading company on the entire planet, and at one time it was ranked as the 10th biggest company in the world.  It is linked to trillions of dollars of derivatives trades globally, and if the firm were to implode it would be a financial disaster unlike anything that we have seen in Europe since the end of World War II.  Unfortunately, all signs are pointing to an inescapable death spiral for Glencore at this point.  The stock price was down nearly 30 percent on Monday, and overall Glencore stock has plunged nearly 80 percent since May.  There are certainly other candidates for “the next Lehman” (Petrobras and Deutsche Bank being two perfect examples), but Glencore has definitely surged to the front of the pack.  Right now many analysts are openly wondering if the firm will even be able to survive to the end of next month.

If you are not familiar with Glencore, the following is a pretty good summary of the commodity trading giant from Wikipedia…

Glencore plc is an Anglo–Swiss multinational commodity trading and mining company headquartered in Baar, Switzerland, with its registered office in Saint Helier, Jersey. The company was created through a merger of Glencore with Xstrata on 2 May 2013. As of 2014, it ranked tenth in the Fortune Global 500 list of the world’s largest companies. It is the world’s third-largest family business.

As Glencore International, the company was already one of the world’s leading integrated producers and marketers of commodities. It was the largest company in Switzerland and the world’s largest commodities trading company, with a 2010 global market share of 60 percent in the internationally tradeable zinc market, 50 percent in the internationally tradeable copper market, 9 percent in the internationally tradeable grain market and 3 percent in the internationally tradeable oil market.

…click on the above link to read the rest of the article…

Petrobras Default Looms Under $90B Dollar-Denominated Debt

September 24, 2015

Petrobras Default Looms Under $90B Dollar-Denominated Debt

There is blood on the streets wherever you look in Brazil today, but probably of most interest to the hundreds of US asset managers (the ones managing your mutual funds) is what happens to Petrobras as it remains so widely held. As we noted below, bond prices are collapsing and default risk is soaring, and with the nation’s currency collapsing amid the lower-for-longer oil prices, $90 billion of dollar-denominated debt could soon potentially be too burdensome for the company to repay.

Default Risk is exploding…

And as New York Shock Exchange details,

S&P recently lowered Brazil’s credit rating to junk status. It later downgraded 60 corporate and infrastructure entities in Brazil, including cutting Petrobras (NYSE:PBR) two notches to “BB.” Petrobras has been reeling from a corruption scandalthat reportedly involved Petrobras’ executives and directors awarding suppliers over-inflated contracts in exchange for kickbacks. The scandal has cost the company billions of dollars, and has been a blow to the reputation of Brazil’s President Dilma Rousseff.

PBR is off about 70% over the past year, versus a 50% decline for the Brazilian ETF (NYSEARCA:EWZ) and flat growth for the S&P 500 (NYSEARCA:SPY). Investors should continue to avoid PBR for the following reasons:

Stagnant Revenue And Earnings

When it rains, it pours for Petrobras. In addition to the corruption scandal, a free fall in oil prices has stymied the company’s revenue growth. For the first half of 2015, Petrobras’ revenue was down 27% Y/Y from $71.4 billion to $52.0 billion, while EBITDA growth was flat. EBITDA margin increased to 26% in the first half of 2015 from 19% in the year-earlier period, as the company slashed cost of sales, SG&A expense and R&D.

 

…click on the above link to read the rest of the article…

Rousseff Coup Could Sink Brazil, Emerging Markets

September 20, 2015

Rousseff Coup Could Sink Brazil, Emerging Markets

Image

Dolls in likeness of Lula da Silva, Rouseff. Source: The Guardian

Brazil’s President Dilma Rousseff’s approval rating has plummeted to 8% amid the country’s worst recession in two decades. Her job is at risk too. Earlier this week opponents filed a petition to impeach Rousseff due to allegations of corruption by former president Luiz Inacio Lula da Silva at oil giant Petrobras of nearly $2 billion:

This week opponents of Ms Rousseff, incensed by allegations that “pixulecos” mostly involving ruling coalition politicians have cost Petrobras at least R$6bn (US$1.5bn), took their campaign to congress by filing a petition for impeachment with the speaker of the lower house Eduardo Cunha … The petition from Mr [Helio] Bicudo, which was backed by the opposition in congress, marks the start of what could be a long process to try to topple the former Marxist guerrilla only nine months into her second four-year term.

Rousseff – hand-picked by Lula da Silva to succeed him – appears to be caught up in da Silva’s backdraft. Opposition parties also claim she violated Brazil’s fiscal responsibility law when she doctored government accounts to allow more public spending prior to the October election last year. Rousseff in turn described the attempt to use Brazil’s economic crisis as an opportunity to seize power a modern day coup.

Inopportune Time For A Coup

Petrobras In Dire Straits 

Political turmoil could not have come at a worst time. The Petrobras debacle has been a point of contention for the populace. While the elite profited from bribes and kickbacks at the state-owned oil giant, Petrobras is laying off workers and cutting supplier contracts in order to stem cash burn.

And those efforts may still not be enough to stave off bankruptcy. With $134 billion in debt – $90 billion of it dollar-denominated – Petrobras is the world’s most-indebted oil company. With oil prices 60% below their Q2 2014 peak, Petrobras will likely crumbleunder its debt load.

…click on the above link to read the rest of the article…

 

 

 

World Is Now “More Exposed than Ever” to Explosive Dollar

September 15, 2015

World Is Now “More Exposed than Ever” to Explosive Dollar

One of the craziest financial creations on earth, available only near the peak of enormous credit bubbles when nothing can ever go wrong, became available this spring: 100-year bonds issued by governments or companies in emerging countries, in currencies they don’t control.

Yield hungry investors in developed markets who purposefully had been driven to near-insanity and drunken benightedness by the zero-interest-rate policies of central banks around the globe jumped on them. For them, it was the way to nirvana.

At the peak of Draghi’s QE hype in April, Mexico, which has a long history of debt crises, was able to sell €1.5 billion of 100-year bonds denominated in euros because yields were even lower in the Eurozone and bond fund managers there even more desperate and insane; at a ludicrously low yield to maturity of 4.2%.

Even more inexplicable was just how Petrobras, Brazil state-controlled oil company, was able to bamboozle investors on June 2 into buying its 100-year dollar-denominated bonds.

At the time, the company had just ended a five-month delay in releasing its financial statements. It’s tangled up in a horrendous corruption scandal that has reached the highest echelons of political power. It’s backed by the Brazilian government whose credit rating, as everyone had been expecting for months, was cut to junk last week by Standard and Poor’s. To top it off, Brazil has been facing a deep recession and a plunging currency, which makes paying off dollar-denominated debt prohibitively expensive.

And it renders that debt toxic.

Petrobras, whose credit rating was cut to junk the day after Brazil’s – though Moody’s had cut it to junk seven months ago – faces other, even bigger problems: over $130 billion in debt, the most of any oil company, and the terrific collapse in oil prices.

 

…click on the above link to read the rest of the article…

Hundreds Of Thousands Take To The Streets In Brazil Demanding President’s Impeachment

August 16, 2015

Hundreds Of Thousands Take To The Streets In Brazil Demanding President’s Impeachment

Protests are underway in Brazil as hundreds of thousands take to the streets to call for the impeachment of President Dilma Rousseff. Here’s Bloomberg:

An estimated 25,000 protesters in Brasilia marched toward Congress, chanting against Rousseff and corruption, carried a long banner demanding “Impeachment Now.”

Rouseff monitored proceedings from her official residence, due to meet with some of her cabinet in the afternoon, said Justice Minister Jose Eduardo Cardozo.

juliana barbassa @jbarbassa

Protest in : “Military intervention is not a crime” via @tariqpanja UNBELIEVABLE.

.

Background:

When the world’s foremost mainstream media outlets begin to run stories with titles like: “How to Impeach a Brazilian President: A Step-by-Step Guide“, you know your political career may be in trouble.

Brazil’s Dilma Rousseff – who recently became the country’s most unpopular democratically elected president since a military dictatorship ended in 1985, with an approval rating of just 8% – faces a litany of problems, not the least of which are accusations around fabricated fiscal account data and corruption at Petrobras where she was chairwoman from 2003 to 2010.

But beyond that, Brazil is mired in stagflation and, as Morgan Stanley recently noted, is at the center of the global EM unwind triggered by falling commodity prices, slowing demand from China, and an imminent Fed rate hike. Underscoring the depth of the economic malaise is the following graphic from Goldman which shows that when it comes to inflation-growth outcomes, it doesn’t get much worse than what Brazil suffered through in Q2.

 

…click on the above link to read the rest of the article…

“Brazil Just Getting Worse and Worse”

May 14, 2015

“Brazil Just Getting Worse and Worse”

The “B” in the falling BRICS…

Brazil is in a tough spot. Led by weak investment and plummeting confidence, growth, after slowing markedly since mid-2013, came to a virtual halt in 2014. This largely reflects the impact of diminished competitiveness, the erosion of policy credibility, owing to a persistent deterioration of fiscal outcomes and above-target inflation, and a worsening of external conditions for the country.

Risks to the outlook are significantly to the downside, and include adverse ramifications from the ongoing corruption probe concerning Petrobras, the possibility that fiscal policy goals may not be fully met, and energy and water rationing.

External downside risks emanate from a tightening of global financial conditions, geo-political tensions, and contagion from adverse developments in other emerging economies.

These risks could conflate if they were to combine with domestic policy shortfalls, and would threaten macro and financial stability.

The phrase, “threaten macro and financial stability,” is official-speak and central-banker jargon for a resounding economic and financial crash. It’s Brazil’s doomsday scenario.

This was written not by some doom-and-gloomer, but by the IMF. It how its report on Brazil starts out.

The report never mentioned “austerity,” the classic IMF prescription to make sure the teetering country’s sacred bondholders – mostly financial institutions – don’t end up holding the bag. But “austerity” has become object of derision. So the report bandies about the exact synonym, “fiscal consolidation,” after initiating it promisingly:

 

Fiscal consolidation should proceed without delay along the announced lines, while monetary policy should remain tight to bring inflation to target.

State-owned Petrobras, the country’s largest company, the once shining knight and in the once most promising industry, has been torn apart by corruption allegations that go all the way up the political ladder. And things have essentially ground to a halt.

 

…click on the above link to read the rest of the article…

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress