* Net income in the quarter was 7.69 bln reais
* Revenue rose 9.68 pct to 72.5 billion reais
* Net crude, fuel imports rose to 454,000 barrels/day
By Jeb Blount
RIO DE JANEIRO, April 26 State-controlled oil
company Petroleo Brasileiro SA said on Friday that
first-quarter profit fell 17 percent as oil-output fell, imports
soared and fuel subsidies ate up cash needed for investment.
While the results beat analyst expectations, the Brazilian
company failed again to fulfill a promise to rein in operating
costs, which jumped in almost every major category compared with
the first quarter of 2012. Profit margins also slipped.
Net income in the three months ending March 31 fell to 7.69
billion reais ($3.85 billion) from 9.21 billion reais in the
first quarter of 2012. The average profit estimate of five
analysts surveyed by Reuters was 6.7 billion reais.
Performance, though, was stronger than in the previous
quarter, one of the weakest in the company's recent history.
Operational profit, which excludes non-cash financial
results, rose 72 percent from the fourth quarter of 2012. Still,
financial results wiped out those gains, leaving bottom-line
profit only 1 percent higher from the previous quarter.
Production at Petrobras, as the Rio de Janeiro-based company
is known, fell for nine consecutive months through February,
compared with each of those same months a year earlier.
"As we expected, there was a decline in oil production in
the first quarter," Chief Executive Maria das Graças Foster said
in a statement on Friday. "As we said in our 2013-2017
investment plan, oil and gas output in Brazil in 2013 should be
stable compared to 2012."
Production, she added, would be lowest in the first half of
The output decline, the result of a platform-maintenance
program in the Campos Basin, forced an increase in oil imports,
while reducing exports.
As a result, Petrobras' net import of oil and refined
products, or the difference between exports and imports of crude
oil and fuels, rose more than nine-fold in the quarter to an
average 454,000 barrels a day, the statement said.
It has also undermined returns at the company's flagship
exploration and production, or E&P, division. Profit there
slipped by a fifth to 15.1 billion reais, compared with 18.8
billion reais in the first quarter of last year.
E&P profit also fell 14 percent from the fourth quarter,
making it the only major Petrobras unit to see its performance
The biggest obstacle to higher profitability has been
Brazil's government, Petrobras' controlling shareholder.
Seeking to limit inflation, it prevented domestic fuel
prices from rising at the same pace as international oil prices.
With the company buying more fuel abroad, it was then forced to
sell it at home at a loss.
Over the last year, the loss-making sales have squeezed
profitability and forced debt to rise beyond levels stipulated
by Petrobras' own rules. Petrobras posted its first loss in 13
years in the second quarter of 2012.
INVESTORS LOSE BILLIONS
Eager investors in recent years bought Petrobras shares
expecting the company to move fast to develop giant offshore
reserves discovered near Rio starting in 2007. But many of those
investors have fled because of the company's problems, which
included repeated cost overruns and lengthy development delays.
The company's market value, which ranked in the world's top
10 less than five years ago, plunged by 83.5 billion reais
($41.8 billion) in the 12 months ending March 31. It lost 10.5
billion of that in the first quarter alone.
Despite the company's rising costs and debt, the government
is still pushing Petrobras to complete a $237 billion five-year
expansion plan, the world's largest corporate spending
That has been difficult because of the government's limits
on fuel prices. The handful of modest increases the government
has allowed over the past year have been about the only source
of improved performance.
Net sales, or total sales minus sales taxes, rose 9.68
percent to 72.5 billion reais from 66.1 billion reais a year
earlier. The figure was in line with the average analyst
estimate of 73.4 billion reais.
Earnings before interest, taxes, amortization and
depreciation, or EBITDA, a measure of a company's ability to
generate cash from operations, fell 1.76 percent to 16.2 billion
reais, compared with 16.5 billion reais a year earlier. That
beat the average analyst estimate of 14.5 billion reais.
Thanks to the fuel price increases, losses narrowed at the
refining division, which in 2012 surpassed the entire company's
profit of 21.2 billion reais.
Losses at the refining division in the quarter decreased
from a year earlier by 7.9 percent to 6.53 billion reais. They
fell 25 percent from the fourth quarter.
While the fuel hikes have reduced the difference between
world and domestic prices, Petrobras still sells imports at well
below the price it pays for the fuel. It also sells for less
than the cost of refining its own Brazilian crude.
The difference between world and domestic prices fell in the
quarter to 20.1 percent from 28 percent in the fourth quarter
for diesel, according to Sao Paulo's Planner Corretora. The
gasoline difference fell to 18.9 percent from 23.5 percent.