Mensajepor ALIBABA » Jue Feb 05, 2015 8:27 am
Petrobras (ON) (Neutral, PT R$15) - Who will run
Petrobras and where to? (Lilyanna Yang, CFA)
The resignation of CEO Graça Foster and her trusted five
Directors (the ones without political affiliation, appointed by
her upon taking office three years ago – see Figure 1) came
earlier than anticipated (i.e., before the audited FY14
numbers), amid recent credit rating downgrades (Moody's,
Fitch) and co.'s disclosure in delayed 3Q14 statements that
co. could write-off as much as R$89bn (under a conservative,
refuted valuation methodology) vs. a much lower (but
growing) R$4bn in corruption money (click here for details).
With low political support for transparency on top of already
low credibility from credit rating agencies, the press cited
reputable Finance Minister Levy as in charge of finding a new
CEO; the aim is to restore investment confidence and avoid
an investment grade downgrade. With no replacement yet,
uncertainties loom. In the meantime, Petrobras will be run by
a Board comprised mostly of government-appointed
members (Figure 2) with no/limited experience in the oil
industry or in the private sector, and arguably weaker
commitments to equity investors. The only remaining
Directors are the recently-elected Governance, Risks and
Compliance head and Jose Dutra, affiliated to the PT
party/former CEO of Petrobras who as per local press refused
to step down despite press allegations that he is also involved
in the Car Wash scheme. A new CEO name might come out
from the upcoming Friday's Board meeting. We are not sure.
The press has cited a few potential replacements (including
former Petrobras director Landim who helped found OGX
before he split with Eike Batista and is now head of a small
pure oil E&P), but the new name cited is Eduarda La Rocque,
former Rio city’s finance secretary (positive resume for CFO
post, close to Levy). The parent shows no sense of urgency
for changes at the Board, whose composition comes in bold
contrast with that of some other NOCs such as Norwaybased
Statoil, and explains part of co's high P/NAV discount
(charts 3,4) We think an equity issuance is already priced-in in
the stock price, and favour the PNs
