Brazil's Petrobras posts solid margins, but one-off charges hit profits

RIO DE JANEIRO (Reuters) - Brazil’s Petrobras posted an unexpected loss thanks to substantial non-recurring fiscal charges, even as operating earnings were bolstered by a recovery in fuel sales and oil revenue.

FILE PHOTO: A logo of Brazil's state-run Petrobras oil company is seen at their headquarters in Rio de Janeiro, Brazil October 16, 2019. REUTERS/Sergio Moraes/File Photo

In a Wednesday securities filing, Petroleo Brasileiro SA PETR4.SA, as the state-run oil company is formally known, posted a third-quarter loss of 1.546 billion reais ($275 million). Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for some one-off items, came in at 33.4 billion reais, above the Refinitiv estimate of 29.7 billion reais.

Among the one-off charges that the company highlighted was the payment of 1.9 billion reais to two state governments to settle outstanding tax disputes, as well as a significant bond buyback program. Declines in the Brazilian real against the U.S. dollar helped magnify some losses, the company added.

Petrobras said that, excluding one-off items, the company would have posted a net income of 3.2 billion reais, trouncing the Refinitiv estimate of 736 million reais.

Among the positive highlights for the company was significant growth in sales, particularly of gasoline and diesel. Net revenue came in at 70.7 billion reais in the quarter, up 39% from the previous period.

“The recovery of diesel and gasoline sales stands out,” the company said. “These products were heavily affected by COVID-19 in the second quarter and their recovery was the strongest in our portfolio, both in terms of volume and pricing.”

Crude exports to China - which had sky-rocketed in recent quarters as it ramped up output as the worst of the pandemic passed - slowed to pre-pandemic levels. Meanwhile, exports to other markets, such as the United States, Spain and Indonesia, grew significantly from the second quarter.

Even Chinese demand may have recovered late in the quarter.

Brazil jumped to become China’s third-biggest crude oil supplier in September, import data showed on Sunday, as China’s independent refiners scooped up cheap supplies of the South American exporter’s relatively high quality oil.

Petrobras said that median production costs fell from $7.90 per barrel of oil equivalent in the second quarter to $4.50 in the third quarter, thanks in part to efficiency gains and in part to the depreciation of the real.

($1 = 5.62 reais)

Reporting by Gram Slattery and Sabrina Valle; Editing by Christian Plumb and Sam Holmes