Petrobras Chairman Takes Leave as Driller Extends Cost Cuts

  • `This could lead to additional investor caution,' BofA says
  • Ferreira's temporary departure comes after Petrobras downgrade

Petrobras Chairman Murilo Ferreira is taking a leave of absence less than five months after he was appointed to help the government-controlled driller emerge from a mountain of debt and a corruption scandal.

Ferreira, who will continue in his role as chief executive officer of Vale SA, requested leave from Petrobras board duties until Nov. 30 for personal reasons, the iron-ore miner said in an e-mailed response. His backup at Petrobras, Clovis Torres, also a Vale executive, will stand aside to make it easier for the board to nominate an interim chairman among current members.

“This could lead to greater concerns about the independence of the board and corporate governance,” Bank of America analysts Frank McGann and Vicente Falanga said Monday in a note to clients. “We believe this could lead to additional investor caution towards Petrobras’s shares.”

Divergences between Ferreira and management, led by CEO Aldemir Bendine, surfaced last month when Ferreira voted against selling a stake in the company’s fuel distribution unit before taking steps to improve performance.

Ferreira has asked management to intensify spending cuts before the company started selling assets amid the oil rout, two people close to the company’s board said, speaking anonymously because board meetings are private. By leaving, Ferreira is showing he wants Petrobras to act faster to revive the company’s financial condition, a third person said.

Ferreira’s temporary board departure comes as Petrobras seeks to deepen cutbacks and productivity measures after prices collapsed and its credit rating was cut to junk. The Rio de Janeiro-based producer, formally known as Petroleo Brasileiro SA, declined to comment on reasons for the leave.

Deteriorating Scenario

Prior to a rating downgrade by Standard & Poor’s last week, Petrobras had announced plans to reduce its operating costs by about $12 billion through 2019. The company will also review its outlook for currency and oil prices, as the scenario has deteriorated since it unveiled a business plan in June.

Ferreira’s appointment in April, replacing Luciano Coutinho, broke with a tradition of political appointees. Previously, the chairman position was occupied by former Finance Minister Guido Mantega and President Dilma Rousseff during the government of her predecessor Luiz Inacio Lula da Silva.

He and Bendine were appointed to guide Petrobras out of a scandal involving graft and mismanagement at refinery projects that cost the company billions of dollars and contributed to the biggest debt load among oil producers globally.

Petrobras shares rose 0.9 percent to 7.73 reais at 4:54 p.m. in Sao Paulo, reversing earlier losses.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE