(Adds details on results, reasons for profit decline)
By Jeb Blount and Marta Nogueira
RIO DE JANEIRO Aug 8 Profit at Brazilian
state-run oil company Petrobras slumped 20 percent in the second
quarter from a year earlier, the company said on Friday, as
rising fuel imports, debt costs and operating expenses offset
higher output and prices.
Net income at Petroleo Brasileiro SA, as the
company is formally known, fell to 4.96 billion reais ($2.18
billion) in the three months ending June 30. That compares with
6.20 billion reais a year earlier.
The profit was nearly a third below the 7.04 billion-real
average estimate of 10 analysts surveyed by Reuters.
Profit fell 8 percent compared with the first quarter.
The results reflected a tightening squeeze at Petrobras
caused by the conflicting economic policy goals of its
controlling shareholder, the Brazilian government.
A drive to develop giant, new offshore oil and gas resources
has Petrobras spending $221 billion over five years on
expansion, one of the world's largest corporate investment
At the same time, the government has reduced the amount of
cash the company has available to pay for those investments by
forcing it to subsidize domestic gasoline and diesel fuel. The
controls are aimed at helping the government control inflation.
With Petrobras's refineries unable to meet domestic demand,
refining unit losses have soared as it is forced to import
gasoline and diesel to make up the shortfall.
Domestic fuel price hikes allowed by the government failed
to keep pace with the cost of imports.
Net imports of fuel and oil rose 81 percent compared with a
year earlier, to 633,000 barrels a day in the three months
ending June 30. This contributed to a loss at the refining and
supply unit, of 3.88 billion reais.
Crude oil and natural gas production rose 1.7 percent from a
year earlier, as new areas barely made up for declining older
fields. Expensive offshore projects are months or years behind
schedule, eating up more investment capital. As cash is
squeezed, debt has had to rise to meet the company's investment
As a result, Petrobras has become the most-indebted and
least-profitable of the world's 15 largest oil companies by
market value, according to Thomson Reuters data.
Free cash slipped 8.8 percent to 66.36 billion reais in the
quarter. Total debt jumped 15 percent since the end of 2013 to
308 billion reais ($140 billion). Higher levels of debt also
boosted financial costs, the company said in the statement.
Net sales, or total sales minus sales taxes, rose 12 percent
to 82.3 billion reais, a number in line with analysts'
expectations as crude prices rose.
Higher operating costs reduced adjusted earnings before
interest, taxes, depreciation and amortization by 10 percent
from a year earlier to 16.2 billion reais. Analysts had expected
17.2 billion reais.
($1 = 2.28 Brazilian reais)
(Additional reporting by Stephen Eisenhammer; Editing by Gunna
Dickson and Leslie Adler)