APBR (ord) APBRA (pref) Petrobras Brasil

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Parente Sees Petrobras Becoming More Profitable & Leaner Amidst Low Oil Prices
Parente Sees Petrobras Becoming More Profitable & Leaner Amidst Low Oil Prices
Bidness Etc takes a look at how the newly appointed CEO is looking to tackle Petrobras problems

By Staff Writer on Jun 20, 2016 at 8:51 am EST


The newly appointed Petrobras CEO, Pedro Parente, aims to restore profitability in the Brazilian oil giant, as he has pledged to keep the company away from any political interference. Mr. Parente, who recently replaced Aldemir Bendine, aims to bring back the “greatness” to the company. The federally operated oil & gas company has suffered a lot of problems in the past few years, amidst low crude oil prices and a multi-billion dollar corruption scandal.

According to the Wall Street Journal, Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) new CEO eyes the company’s revival through asset divestiture and debt reduction program. Mr. Parente said he would shed all the “outdated ideologies,” which are no-longer serving the company.

Petrobras: Never Ending Problems
The main problem haunting the state-owned oil company is its huge debt burden. At the end of the first quarter (1Q) of fiscal 2016, Petrobras had more than $125 billion in liabilities. The probe related to the corruption scandal and a sustained decline in oil & gas prices are just increasing the company’s debt burden. A number of lawsuits have been filed in the US and Brazilian courts against the energy giant amidst the ongoing series of investigation.


On one hand, there appears to be no signs of the company being able to lower its debt in the near term; on the other, its cash flow position is deteriorating. Petrobras cash and cash equivalents stood at $21.86 billion as of March 31. In the preceding quarter, the company had cash balance of $25.06 billion. The weak commodity prices and low fuel prices affected its sales revenue and cash balance during the first three months of the year.


Apart from the growing debt burden, Petrobras is also suffering from plunging revenue and board room turmoil. In 1Q, it reported the biggest quarterly loss of 1.2 billion Real ($350 million). The high impairment charges and decline in crude oil production affected its earnings in the last quarter.

Pedro Parente: New CEO, New Strategy?
Mr. Parente is the former executive of US agribusiness company’s Brazilian unit, Bunge Ltd. and has served Petrobras board room between 1999 and 2003. Along with the energy company, he is also serving as the chairman of BM&FBovespa SA.

Given that Petrobras is one of the most important companies in Brazil, new CEO believes its revival is crucial for the economy. With the ongoing economic and political turmoil, the country is experiencing one of its worst recessions with high inflation rates and slow gross domestic product growth; the unemployment rate has also increased, while Brazilian Real has depreciated.

Mr. Parente is expected to come up with strategies to reduce the billions of dollars of liabilities and to keep the company away from political meddling; ultimately helping the falling economy. The agribusiness former executive has announced to carry on with the $15.1 billion asset divesture program and cost reduction initiatives introduced by the former CEO.

In July last year, Petrobras announced $57.4 billion worth of asset offloading plan for the three-year period ending 2018. The company plans to sell $15.1 billion worth of assets by the end of this year and around $42.6 billion worth of oil & gas assets by 2018.

Although Mr. Bendine was highly optimistic about Petrobras’ asset sell-off plan, in low oil environment, the company sold less than $1 billion worth of assets in 2015; Mr. Parente aims to continue this strategy and achieve the target. He said the energy giant has received three bids for its fuel distribution unit, BR Distribuidora SA, and is also in talks with Brookfield Asset Management Inc. for its natural gas pipeline unit.

Mr. Bendine set out to reduce Petrobras’ debt to cash ratio to 2.5 times, whereas the new CEO said he would prefer to keep the ratio between 1–2 times. Although all this is not going to be easy, Mr. Parente said he would continue to work for the betterment of the oil major.

The Brazilian oil & gas company has reduced its 2016–2019 capital expenditure target from $130.3 billion to $98.4 billion. Although it has not yet lowered its operating spending targets, it has adopted a number of initiatives, including employees’ lay-off and slashing of third-party contractors. Furthermore, Petrobras is also improving its cost structure through production and operation efficiency.

Moreover, the Rio de Janeiro-based company also supports the bill by the Brazilian Congress to reduce its minimum stake to 30%; the company plans to open up the blocks for foreign energy giants. Although this has yield a lot of criticism from the workers’ unions, Mr. Parente said the oil major is open for negotiations with the union.

Petrobras CEO said the company has limited funds to invest in the energy assets, so he wants to carefully use them to yield long-term benefits. Leaving the leadership in the sub-salt blocks would allow it to invest the limited funds in high-return assets.

Corruption Scandal, Political Interference
Petrobras is engulfed in one of the biggest bribery and kickback scheme in the history of Brazil. Its top executives are accused of taking bribes from the construction companies to inflate the prices of the engineering contracts. Money from the scandal was then funneled into the pockets of Petrobras senior managers and politicians.

The corruption probe has involved a number of Workers’ Party top politicians and other important figures in Brazil, including BTG Pactual former CEO, André Esteves, and former senator, Delcidio Amaral. In his plea bargain, Mr. Amaral even accused President Dilma Rousseff of having knowledge of the corruption scandal. In May, Ms. Rousseff was suspended from her position for manipulating public account and the Vice President, Michel Temer, took over her office.

In an interview last Friday, Mr. Parente said that he would try to keep the company away from any political intervention. He said that although he could not control all the ongoing turmoil in the Brazilian political arena, he would do his best to solve the company’s growing problems. The newly appointed CEO said he would keep the best management, who would show high level of integrity and ethical conducts in the behavior.

Although Petrobras is currently surrounded by a number of problems, Mr. Parente is committed to change the company’s condition. We believe he should keep the energy giant’s operations transparent and free from political interference. Moreover, as oil prices have shown slight recovery in the past few months, the company should also accelerate its non-core asset sell-off plan.

[Bochaterow]

Vendiste el jueves ?

Te la querescortar ????


Toma

vendi el put de la 42 a 2,55

[Arnaldo007]

Que feo son los feriados....

[hipotecado]

[Bertoli1973]

Mañana un arranque de 10 porciento arriba minimo

[Bertoli1973]

A un pasito de usd 7

[Athila]

todo europa arriba de 3% a estas horas...
ay belgrano..

Habría que sacar todos los feriados, que se festeje pero, LABURANDO.-

[HOMEROM57]

Será GAP de continuación el de hoy ?

Para mi a la larga o a la corta siempre los cierran..... esperemos que sea dentro de 10 años, luego de haber subido hasta 30 verdes.

Sino a estar atentos a la primera señal de resistencia..... de largo es recontra UP.

[hipotecado]

Vendiste el jueves ?

Te la querescortar ????


Toma

[hipotecado]

Listos para duplicarcaca

[raiden]

todo europa arriba de 3% a estas horas...
ay belgrano..

[Swap]

Yo lo único que logre aprender como trader es que no se en el corto para que lado va el mercado o sea que el tiempo tiene que jugar a mi favor como trader debo acertar un 50 por ciento en promedio

Bocha,
Un gusto leerte, postea mas seguido!

[Swap]

BUENO MAÑANA APBR USA hacia abajo, volviendo a testear U$ 6 o muy cerca

Sigo con lo lanzado y con los puts, muy tranquilo

Papu,
Te van a sacar en camilla, NO hay Brexit...

Betting odds gave the "In" a 69 % prob from 59 % on Thursday --> http://www.reuters.com/article/us-brita ... SKCN0Z50PC

SPX +1%
DXY -0.7% (una locura para este indice)
WTI +1%

[Bochaterow]

Yo lo único que logre aprender como trader es que no se en el corto para que lado va el mercado o sea que el tiempo tiene que jugar a mi favor como trader debo acertar un 50 por ciento en promedio

[Bochaterow]

LANZAR PUTS ES MUY REBUSCADO

Si estas tan seguro porque directamente no compras calls y te cubris con "algo" lanzado ? ?

Te digo porque ESTE PELPA EMPOMA Y EL OIL

Cuando lanzas un put el tiempo juega a tufavor la prueba esta que los put de 26 los pude pasar a 22 cobrando y también a 18 cobrando etcetc y cuando baja mucho poder lanzar el call contra los put papel que tenes la clave es que si no pasa nada el tiempo juegue a tu favor