Why Petrobras' Q2 loss doesn't worry analysts

Although the US$344mn loss reported by Brazil’s federal oil firm Petrobras in Q2 came as a surprise, analysts told BNamericas that they are not overly concerned. 

They also don’t expect falling investments for the coming years, even though the company made a downward revision to projected capex for 2024.

The negative quarterly result was caused by non-recurring factors, such as the provision of employee benefits, exchange rate variations and a tax agreement with the government.

Excluding these issues, Petrobras would have recorded a profit of 28bn reais (US$5bn), according to João Abdouni, an analyst at Levante Inside Corp.

"It was a neutral result, with a series of provisions that make it a little difficult for investors to understand. These are factors that involve the company's past decisions or projections of future spending," he told BNamericas. 

Abdouni highlighted that Petrobras generated free cash flow of 32bn reais in the quarter and that the company will pay out more than 13bn reais in dividends. 

Sidney Lima, an analyst at Ouro Preto Investimento, said the result was acceptable, given the non-recurring factors.

"The outlook for the coming quarters will depend on the stabilization of these impacts, with a possible return to profitability, given the company's consistent operating performance," he told BNamericas. 

Lima added that the capex reduction planned for 2024 reflects a strategic reassessment. "Although Petrobras has revised its investments downwards, I don't believe in a significant reversal in the coming years, but rather greater selectivity in projects."

Mahatma dos Santos, technical director of petroleum association Ineep, believes that Petrobras will continue to generate strong cash flow and produce positive results. 

He doesn't believe that the reduction in capex is a trend in the firm's 2024-28 business period. "This reduction reflects decision-making processes and uncertainties surrounding which new exploratory frontiers Petrobras should reach," Dos Santos told BNamericas.

At a press conference on August 9, Petrobras CEO Magda Chambriard said profits will return and added that the oil exploration and production segment will remain the company's priority.

She also said that Petrobras will continue to invest in increasing the supply of gas to the market and higher production at its refineries. 

"We’ll invest in fertilizers and petrochemicals as a way of expanding our gas market and taking advantage of the synergies with our refineries," said Chambriard.

She added that regaining control of the Mataripe refinery in Bahia is not a priority. "It's a business proposed to Petrobras like any other." 

Petrobras' logistics, marketing and markets director, Claudio Schlosser, denied that the loss resulted from a delay in readjusting fuel prices. 

He said that, after a long period of stability, Petrobras readjusted the prices of gasoline, diesel and LPG for distributors on July 9. 

"Our strategy is to avoid transferring external volatility to the domestic market," he said during the press conference. 

Schlosser added that, in the case of diesel, there is strong competition from Russian fuel, which arrives at much lower prices than diesel from other sources. 

"And this cannot be ignored. We’re within the parameters of our commercial strategy," he said. 

Chambriard complemented Schlosser’s comments by highlighting that Petrobras has slightly lost market share in recent months. 

"And this is what shows that we’re absolutely right in our pricing strategy. Raising the price now would be giving up market share, which is far from our intention," she said.