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Petrobras Q4 profit beats outlook, debt passes limit   Sources - 5th February 2013, Indian Express

Brazil's state-led oil company, Petroleo Brasileiro SA, said on Monday that fourth-quarter net profit rose 53 percent from a year earlier as unexpected financial gains made up for rising operational costs.

Consolidated net income attributable to shareholders was 7.75 billion reais ($3.89 billion) in the three months ending Dec. 31, the Rio de Janeiro-based company said in a filing with Brazil's CVM securities regulator.

While profit beat the 6.21-billion-real outlook in a Reuters survey of 12 analysts, Petrobras said debt also rose to 2.77 times earnings before interest, taxes, depreciation and amortization (EBITDA).

That's above the company's own limit of 2.5 times EBITDA, as Reuters reported Dec. 18 after Moody's Investors service put Petrobras debt on watch for a possible downgrade.

The result comes as Chief Executive Maria das Grašas Foster promises to find savings of more than $15 billion to prevent a $237 billion five-year investment plan from ballooning. That plan, the world's largest corporate investment program, aims to develop giant offshore reserves and make Petrobras one of the world's largest oil companies by 2020.

"It's good to see the company reporting a higher profit and beating expectations, but the numbers also raise a lot of questions and doubts," said Pedro Galdi, oil company analyst with SLW Corretora, a Sao Paulo securities brokerage. "It's hard to see how this result shows a company improving its operations and fiscal discipline."

In a note accompanying results, Foster said management knows the company's operational problems, is working to fix them, and believes Petrobras has good medium and long-term prospects. Output in 2013, though, will remain at 2012 levels, she said.

All of the fourth-quarter profit increase can be attributed to a 2.64-billion-real sale of Brazilian government Treasury bonds and a two-thirds decline in income and social security taxes, according to the company's income statement.

The company's operational difficulties were more sharply reflected in the annual result, the worst for the Rio de Janeiro-based company in eight years.

Full-year 2012 profit of 21.2 billion reais was 36 percent less than in 2011, owing to soaring costs and a second-quarter loss, the company's first in 13 years.

Rising costs prevented Petrobras from taking advantage of soaring Brazilian fuels demand and the government's approval of gasoline and diesel-fuel price increases in June and July.

Net sales, or sales minus sales taxes, rose to 73.4 billion reais, a 12.5 percent increase compared with the fourth quarter of 2011.

Sales were in line with expectations. In the Reuters survey, the average analyst estimate was 73.8 billion reais.


The fuel-price increases, though, didn't make up for the losses Petrobras has taken on its refining operations.

After the June and July increases, Petrobras' wholesale fuel price was still about 11 percent below international prices for gasoline and about 14 percent below world prices for diesel, according to Caio Carvalhal and Felipe Dos Santos, oil and gas analysts with JPMorgan Chase & Co. in Sao Paulo.

Unable to meet demand for fuels from 12 refineries in Brazil, the company, Brazil's only refiner, had to raise imports. Fuel imports jumped 28 percent in the quarter compared to a year earlier.

Because world fuel prices were higher than those in Brazil, it sold that fuel in Brazil at a loss.

Net fuel and oil imports rose 90 percent in the period and refining losses jumped to 5.65 billion reais in the quarter bringing total annual refining unit losses to 22.9 billion reais, an amount larger than the company's entire annual profit.