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Brazil’s state-run oil firm Petrobras signaled on Tuesday that it may have finally turned the corner after the huge 2014 corruption scandal, posting its highest quarterly profit since the beginning of 2013 on the back of higher oil prices and proceeds from asset sales.
Petrobras reported a 56-percent annual increase in net income for Q1 2018, at US$1.96 billion (6.961 billion Brazilian reais), due to higher Brent prices which resulted in higher margins on oil exports, higher volumes and margins on natural gas sales, a gain from sales of stakes in the Lapa, Iara and Carcará fields, and lowered expenses.
The main drivers of the higher net income were the rise in Brent oil prices that averaged US$66.80 in Q1 2018, up from US$53.80 in Q1 2017, and the proceeds from the sales of stakes in the three oil fields, Petrobras said.
Total crude and natural gas production dropped by 4 percent compared to Q1 2017, mainly reflecting maintenance stoppages and the divestment of the Lapa stake.
Petrobras—largely viewed as the world’s most indebted oil company—saw its net debt in U.S. dollars drop from US$84.871 billion in December to US$81.447 billion at end-March, a reduction of 4 percent.
The company’s free cash flow remained positive for the twelfth consecutive quarter, but dropped 3 percent on the year, due to the payment of the first installment in a class action lawsuit that investors won in the United States over the corruption scandal, and due to the hedge of part of the oil production.
In February and March this year, Petrobras hedged 128 million barrels of its expected 2018 production—equal to around 15 percent of total production—at an average price of $65 per barrel, to protect part of its operating cash flow generation this year. The hedge put a floor under around 350,000 bpd of Petrobras’s oil production for 2018, or just above 15 percent of its oil production of around 2.2 million bpd that the company has reported for the past two years.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.