* Common shares dive 8.2 pct on new dividend terms
* CEO says raising output priority despite tough climate
* Recent fuel price rise not enough to stem import losses
RIO DE JANEIRO, Feb 5 The worst annual result in
eight years at Brazil's state-led oil company Petrobras prompted
it to cut the common-share dividend as it sought to preserve
cash to maintain investments as fuel and refining losses mount,
executives said on Tuesday.
Common shares of Petroleo Brasileiro SA fell 8.2
percent on Tuesday in Sao Paulo, reaching their lowest level
since late 2005.
Petrobras will save about 3.5 billion reais ($1.77 billion)
with the common share dividend cut, Chief Financial Officer
Almir Barbassa said, cash needed to keep its planned $237
billion five-year investment plan on track.
"The amount saved is about what it costs for an oil platform
that can produce about 150,000 barrels of oil a day," Chief
Executive Maria das Graças Foster told investors on a conference
call from Rio de Janeiro. "Not making the investment would cause
losses, hurt future cash flow."
Previously Petrobras had paid equal dividends to common and
preferred shareholders, though that is not required under the
law or the company's by-laws.
While most Petrobras shares are held by non-government
investors, the government controls the company through a
majority holding of common stock.
Petrobras cash generation has been squeezed in recent years
as the government, which owns a majority of voting shares,
prevented the company from raising fuel prices in line with
Rising demand at home and refineries working near full
capacity forced the company, the only refiner in the world's
sixth largest economy, to import fuel at world prices and sell
it at home at a loss.
Despite gasoline and diesel price hikes in June, July and on
Jan. 30 Foster said a gap still remains between domestic and
"(2012) was an extremely difficult year," Foster said on a
conference call with investors. "The year 2013 will be even more
difficult, especially in the first half," she said.
Brazil's domestic fuel prices are effectively set by the
government, which owns a majority of Petrobras common, voting
shares. The government has held prices in check to help limit
inflation. Its refining unit lost 22.9 billion reais in 2012, an
amount larger than its entire 21.2 billion full-year profit.
The refining losses helped the company post its worst annual
result since 2004.
Foster blamed a weaker real for the lingering difference in
fuel prices in comments at a press conference regarding
fourth-quarter earnings released late on Monday.
Brazil's Finance Minister Guido Mantega, who is also
chairman of the Petrobras board, told reporters in Brasilia that
because of an increase effective Jan. 30, it is not time to
discuss additional fuel price increases.
Foster said a difficult operating climate would persist but
the company would not waiver from its investment plans to raise
output. The company plans to invest 97.7 billion reais ($49.1
billion) in capital projects in 2013 alone, Foster said.
Petrobras' debt rose to 2.77 times adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA), above
the company's own internal limit of 2.5 times EBITDA.
"Debt rose because of difficulties, declining production,"
Chief Financial Officer Almir Barbassa told investors on the
Debt is likely to remain near that level or go higher in
2013, Foster said adding that she does not think it will cause
ratings agencies to cut the company's "investment-grade" debt
Petrobras is seeking to shed some of its assets to raise
cash. Foster said the company had received offers and hoped to
conclude deals by April.
Petrobras preferred shares rose 0.44 percent in
Sao Paulo after reversing early losses.
Both classes of shares are traded in Sao Paulo and New York.
Only Petrobras common shares have voting rights.