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Brazil’s state oil giant Petrobras reported a net loss of US$5.38 billion for the third quarter of the year, on the back of asset impairments and “investment in associates”. The asset impairments were the main reason for the loss, as the value of fields, refineries and other assets dropped in sync with oil prices and the company’s own efforts to stay afloat by downsizing.
The company also said its assumptions about Brent prices and long-term forex rates had contributed to the loss. The Brazilian real appreciated in the three-month period.
On the plus side, Petrobras also reported free cash flow of US$5.065 billion for the third quarter, up 65 percent on a quarterly basis. This was the sixth consecutive quarter with positive cash flow generation for the company.
Debt, however, remains the highest in the industry and difficult to tackle at these levels. The latest gross figure was US$122.66 billion, down 3 percent since December 2015, but the net figure was almost unchanged, at US$100.3 billion.
The state company has been selling assets to reduce its huge debt pile, but times are hard for everyone, which has made the task difficult. Nevertheless, Petrobras is sticking to its asset sale revenue target of US$15.1 billion by the end of this year, according to CFO Ivan Monteiro, even though so far only 65 percent of it has been completed.
Petrobras was recently lent a hand by the Senate, which last month approved a change in the law regulating the development of Brazils’ oil and gas resources. The change relieved Petrobras of its obligation to be the operator of every project in the sector, with a minimum interest of 30 percent. The company is not in a position to be able to afford that, so the Senate decided to let overseas oil and gas companies to become operators of Brazilian fields.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.