Petrobras Quarterly Profit Beats Estimates on Price Gains

Petroleo Brasileiro SA, the world’s sixth-largest oil company by market value, said first-quarter profit fell 17 percent, less than analysts expected after it increased fuel production and curbed imports.

Net income fell to 7.69 billion reais ($3.9 billion), or 0.59 reais a share, from 9.2 billion reais, or 71 centavos, a year earlier, the Brazilian state-run producer said today in a statement. Per-share profit topped the 57-centavo average of 11 analysts’ estimates compiled by Bloomberg.

Fuel imports fell 7 percent on year to 376,000 barrels a day after refinery output rose 10 percent to 2.1 million barrels a day, the company said. Sales rose 10 percent to 72.5 billion reais on strong demand for gasoline and diesel. The company has sold imported gasoline and diesel at a discount since the start of 2011 as part of a policy to keep inflation in check. The government controls Petrobras’s board with a majority of voting shares.

Domestic fuel price increases combined with a drop in international prices reduced Petrobras’s losses from importing gasoline and diesel, Oswaldo Telles, an analyst at Banco Espirito Santo SA, said in a research report before the report was released. Petrobras increased prices for gasoline and diesel by 6.6 percent and 5.4 percent, respectively, on Jan. 30, and raised diesel prices by 6 percent on March 5.

“If oil and oil product prices were to remain at current levels, we think price gaps would be low enough to be irrelevant for Petrobras and imports would cease to be a source of concern,” Telles said. “We forecast a full margin recovery due to the recent price increases.”

Output Falls

Petrobras sold imported gasoline at a 20 percent loss in the first quarter, down from 28 percent in the fourth quarter, Telles said. The discount will narrow in the second quarter because Petrobras sold at higher prices for part of the first quarter, he said.

Output fell five percent in the first quarter to 2.55 million barrels a day from a year earlier after the company shut production platforms for maintenance. Last year Petrobras posted its first annual output decline since 2004 after new wells in the so-called pre-salt region failed to offset declines at aging Campos Basin fields. Production dipped to 2.6 million barrels a day of oil and natural gas from 2.62 million in 2011.

Capital Investments

Petrobras expects average production this year to match the 2.6 million barrels a day it produced in 2012 after output recovers in the second half, Chief Executive Officer Maria das Gracas Foster said in the report. The company will start production on May 28 at a platform at the Lula oil field, Brazil’s biggest field, and add four more units in the remainder of the year, she said.

Petrobras is investing $236.7 billion over five years to build refineries, develop deepwater fields and ramp up output deepwater fields including Lula. Petrobras produces more oil than any other company in waters deeper than 1,000 feet (305 meters) and is building dozens of platforms and drillships to expand output.

Brent crude futures, the benchmark for two-thirds of the world’s oil, averaged $112.61 a barrel during the quarter, down 4.9 percent from $118.45 a year earlier, on the London-based ICE Futures Europe exchange.

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