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Breakingviews: The pains of Petrobras

Monday, Oct 28, 2013 - 03:46

Oct 28 - Antony Currie and Christopher Swann explain how Brazilian government interference caused the oil giant's whopping Q3 earnings miss – and why shareholders shouldn't expect much to change.

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Brazilian -- John Petrobras does nothing but disappoint shareholders these days -- its state run still proper channels as well. On Friday. Company announced. Pretty bad and things one point five billion US those Crist. And -- I think analysts were expecting about 70% double even with all the she's going to what is going wrong with Petrobras will basically it's run like a government agency and if you look at that strategy and makes. Passionate political science. That is to say that they folks Patrick pressed by very expensive domestic supplies and -- employment. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Yet -- Petrobras to subsidize domestic tried -- -- keeps inflation and keeps people happy. They force Petrobras to take well the lie in the Chandra bullets and you trailing back keeps nationalist happy date night -- At -- moment -- -- on the science field they won't -- bastards that he won't buy you know they have to take that you can send it -- just and I don't know auction results for a very very big field and expect to take you 40%. -- that means the company asked some -- forty billion dollars in investment. And to have that kind of money. Well. 85 billion dollars of net debt which is very unusual for and we'll come the -- -- -- -- these huge cash cows come to several must constantly Chevron is not -- nail in his SE -- neck and -- -- has about two billion dollars net cash and Exxon sensitive. Sparkling clean balance sheet and we very very minimal net net Bryant as of these companies and normally just great cash generated and Petrobras is the great flavor except Cisco also -- 70% of somebody's in the exploration costs are up and and that -- -- reflects I think the fact that again that very technical schools from the cheapest global supply. I have to buy the expensive -- right strike that this is president -- recess policy as it is it just have a policy that governments to -- do some things though she made it -- got she has made it slightly US government will have done some of the things that they've used -- -- -- -- -- of the state. And I hit a lull in a lot of shareholders -- And that went very enthusiastic -- they have huge some deep quartet recess they should be able to -- it out crank up production very very quickly. At a cresting it will shareholders get any of the benefit from this a little bit of the government setting. What's the allocate your shale leasing -- and as a Brazilian presidential election next year does that make any difference whatsoever -- makes a difference to the extent that you come to expect you'd be foolish to expect -- to do anything politically. Damaging in the year and it said -- -- basically similar policy so she -- times -- -- rise a little bit this year and even that prices still way Schultz of -- and -- we've had a we've got about full price crisis since June that lasted changing 2012. It's just not nearly been enough to compensate for the rising cost of imported fuel. And also the fact that the Brazilian ran out currency has slipped considerably in value run. So I mean is that any in any contenders until recent crusade. Actually we're gonna change his policy was on nine -- of the -- I think that's a lot of political consensus in Brazil and using Petrobras in this place just a question of degrees. -- -- might be more pragmatic if she's fools to to be saved by the markets and then buy it collapses and Patrick mess that chance price but well but thanks crystal keep an -- on not. And if -- -- Russia hold -- veterans come to give you right now. But so that's across from now -- back tomorrow with more breaking news.

Breakingviews: The pains of Petrobras

Monday, Oct 28, 2013 - 03:46

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