Brazil: Petrobras 1Q Net Income Jumps to Record High

Brazil’s state-controlled oil and gas company Petrobras  posted a record net income in 1Q11: R$10.985 billion (USD 6.7 Billion), 42% up on last year.

Higher gross profit (positive change of R$894 million) driven by 4% growth in the domestic production of oil and natural gas and a higher oil (+6%) and gas natural (+13%) sales volume on the domestic market, fetching higher prices due to the 4% increase in average price, contributed to the result.

Additionally, the Brent crude price was up, averaging $104.97 in 1Q11 ($76.24 in 1Q10), increasing both export revenues and the international segment’s production and sales. The latter posted a revenue increase of R$1.94 billion.

In the same period, the cost of goods sold (COGS) rose 11%, mainly impacted by higher diesel import, lifting, and refining costs. Expenses remained flat compared to 1Q10. This allowed the Company to post earnings before interest, taxes, depreciation and amortization (EBITDA) 8% higher and an operating cash flow 7% up on 1Q10.

Furthermore, the improved net financial result (positive variation of R$2.723 billion) contributed to the quarter’s results, as a result of a more expensive Real and increased earnings from financial investments.

In 1Q11, the Company disbursed R$2.218 billion as interest on capital to its shareholders and is slated to pay dividends in the order of R$1.565 billion by 06/27/2011, as decided by the GSM. Furthermore, on 04/29/11, the Board of Directors approved the early distribution of remuneration to shareholders in the form of interest on net equity for a total of R$2.609 billion.

Compared with 4Q10, net income was up 4% – With respect to last quarter, the highlights were a 3% drop in COGS due to decreased oil and natural gas sales volumes, a seasonal phenomenon, a lower share of imports, especially diesel, and the R$439 million drop in expenditure in 1Q11 due primarily to fewer write-offs of economically non-viable wells abroad. Thus, operating profit grew 16% and Petrobras’ EBITDA was up 10% compared to 4Q10. The improved operating result was partially offset by higher income tax (+48%) on account of the improved result and a R$754 million drop in tax breaks.

Increase in domestic oil and natural gas production – In 4Q11, Petrobras’ total oil and natural gas output in Brazil and abroad increased 3% compared to the same period in 2010, to a daily average of 2,627,000 barrels of oil equivalent (boed).

In Brazil, total oil & gas production was 4% up on 1Q10, at 2,385,000 barrels per day. Gas output leaped 8% during the quarter, mainly due to the startup of new projects envisaged under the Gas Production Anticipation Plan (Plangás).

Additionally, aiming to boost natural gas production and delivery, Petrobras started up the gas pipeline that connects the Lula Pilot to the Mexilhão platform (200 km of undersea pipelines in deep waters) and the pipeline between Caraguatatuba and Taubaté (Gastau).

In 1Q11, domestic oil production averaged 2,044,000 barrels per day, 3% more than 1Q10, supported by greater output from existing platforms and, particularly, by an increase in production at the Lula Pilot and Tiro, Sidon, and Guará extended well tests. With excellent prospects in pre-salt cluster production development, the Company initiated new EWTs in the Tracajá reservoir, in Marlim Leste, Brava, Marlin and Lula Nordeste.

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Source:Petrobras, May 15, 2011