Brazil's Petrobras reported record profit in second quarter

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Brazil's Petrobras reported record profit in second quarter

Since late last year, Petrobras has sold more fuel oil domestically and increased output in its own Thermal power Plants, as part of a wider policy in Brazil to conserve water levels at hydroelectric dams and avert power outages. Though the energy and power division in Petroleo Brasileiro SA, as the company is formally known, represents a fraction of overall revenue, it was a standout. Electricity generation in the second quarter tripled from a year ago.

Petrobras also got a boost from this year's oil price rebound, which has made robust earnings to energy giants, many of whom are printing as much profit as before the pandemic. Many of Petrobras's U.S. and European investors have used the cash to boost dividends and slash debt. It's a stunning turnaround for an industry that was on the ropes a year ago amid a pandemic-induced price crash.

Also Read: Big Oil Shows Confidence The Era of Large Profits Is Back.

Petrobras reported 42.86 billion reais of net income, up from 1.17 billion in the first quarter. The company has declared that it would bring forward shareholder payouts of 31.6 billion dollars this year thanks to the strong results.

Petrobras continues to increase the oil production from the so-called pre-salt region, which holds its largest and most profitable discoveries. A 180,000 barrel production vessels are expected to start this month and gradually ramp up at the Sepia field. This and other new units allow Petrobras to continue boosting output at legacy fields and compensate production it has lost due to asset sales and natural declines at ultra-deep fields.

Petrobras continued to slash what was once the biggest debt load of any publicly traded oil company, which stood at $63.7 billion at the end of the second quarter. The company vowed to increase dividend payments when it brings its total debt below $60 billion, a target it expects to achieve next year. The ongoing divestment program has helped Petrobras trim their debts. It raised $2.8 billion from selling assets for the year until Aug. 3.

It was the first quarter under former CEO Joaquim Silva e Luna, who took over in April after a row between President Jair Bolsonaro and the Chief Executive Officer about rising diesel prices. Petrobras has pledged to reduce fuel subsidies and continue with Luna's current business plan which calls for divesting assets including refineries to focus on its most profitable projects in the pre-salt.

Investors have yet to see how strongly Petrobras will defend Luna from political intervention. The company recently denied a claim by Bolsonaro that it had earmarked 3 billion dollars to subsidize the cooking gas for families in need.