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Petrobras Profit Surges 38% to Record on Oil Production

Petroleo Brasileiro SA, the world’s third-largest oil company by market value, said fourth-quarter profit surged 38 percent to a record after production increased.

Net income rose to 10.6 billion reais ($6.4 billion), or 81 centavos a share, from 7.7 billion reais, or 87 centavos, a year earlier, the Brazilian state-controlled company said Feb. 25. Per-share profit, which fell after the company’s $70 billion stock offer last year diluted earnings, topped the 67-centavo average estimate of three analysts in a Bloomberg survey.

Petrobras expanded output to an average 2.63 million barrels a day in the quarter and produced a record in December after completing maintenance at offshore platforms. It also started new fields including Lula, formerly known as Tupi, which holds an estimated 6.5 billion barrels, taking advantage of surging prices as demand for fuels increased.

“The combination of robust crude oil price realizations and increases in crude oil production contributed to solid earnings,” Gianna Bern, president of Brookshire Advisory and Research, a Chicago-based risk-management adviser to oil producers, said in a telephone interview on Feb. 25.

Oil futures in New York averaged 12 percent higher in the fourth quarter than a year earlier. Crude oil for April delivery rose 60 cents to close at $97.88 a barrel Feb. 25 on the New York Mercantile Exchange.

Stock Drop

The stock fell 39 centavos, or 1.4 percent, to 28.21 reais as of 1:26 p.m. in Sao Paulo trading and has gained about 3.4 percent this year, compared with a 3.1 percent decline for the benchmark Bovespa Index.

Petrobras gained from increased demand for fuel in the world’s second-fastest growing major auto market behind China. Brazilian car makers produced a record 3.6 million vehicles last year, a 14 percent increase over 2009, according to the country’s automakers association.

“Diesel sales had extraordinary growth and refineries are producing at maximum rates,” Chief Financial Officer Almir Barbassa told reporters in Rio de Janeiro on Feb. 25.

Petrobras, which has a market value of about $243 billion, has gained 4.8 percent this year. Exxon Mobil Corp. and PetroChina Co. are the world’s first-and second-biggest oil producers by market value, respectively.

Revise Investments

Petrobras said it will revise its investment plan this year to include the development of new oil reserves it bought from the government as part of a $70 billion share sale, the largest in history. The company will likely announce its new plan in April or May, according to Barbassa.

Petrobras doesn’t plan to raise domestic gasoline prices, limiting its gains in coming quarters as oil surges to a two-year high. Barbassa expects oil prices to return to between $80 and $90 a barrel in one to two months after tensions in North Africa and the Middle East die down, he said.

Petrobras will need to sell $6 billion to $8 billion of new debt in each of the next five years to help finance its business plan, Barbassa said Jan. 15. Petrobras sold $6 billion of debt in January.

The company is developing the offshore Lula field and may take a minimum stake of 30 percent in the government’s Libra field. Lula and Libra are the Americas’ biggest oil discoveries since Mexico’s Cantarell in 1976. The fields are in a deep-water region, known as the pre-salt, along Brazil’s coast.

Petrobras aims to produce 2.1 million barrels a day in Brazil this year, up from an average of 2.004 million barrels last year, Barbassa said.

The company’s output growth, while increasing at a slower pace than management predicts, compares well with other major oil producers, said Bern of Brookshire Advisory. Petrobras plans to drill 60 offshore wells this year, twice as many as in 2010.

“They’re one of the few majors with a plan to increase production,” said Bern. “You’re going to see an increase in demand for their exports.”

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