Petrobras to stop selling refineries

Brazil’s national oil company Petrobras has agreed with the country’s antitrust regulator to stop selling its refineries in order to increase its processing capacity.

Five years ago, Bloomberg recalls, Petrobras announced its intention, in coordination with the watchdog, to sell a total of eight refineries. Today, after three sales, the company has ended its divestiture, again in coordination with the regulator.

The change in plans comes as the Brazilian government puts increasing pressure on Petrobras to expand its operations and create more jobs, boosting the Brazilian economy. These pressures recently led to the ouster of the company’s chief executive, Jean Paul Prates, and his replacement by the former head of Brazil’s oil and gas industry regulator, Magda Chambriard.

The change at the top came last week, a day after Petrobras reported a 38% drop in net profit for the first quarter of the year on a 15% drop in revenue. This also adds to the bad news for shareholders after outgoing CEO Prates late last year informed them that dividend payments would remain lower for some time as Petrobras tried to expand in new directions. low carbon emissions.

“In our view, Prates’ exit constitutes a deterioration in Petrobras’ governance and a downside risk to the investment thesis,” Citi analysts said in a note cited by Reuters at the time.

“The new CEO comes with pressure to fulfill the investment plan and accelerate investment expansion, which could have a negative impact on the company’s dividend payment.”

The Bloomberg report noted that investors were concerned about the shakeup at the top after Prates prioritized cutting costs and focusing only on the company’s most profitable businesses. On the other hand, the government wants Petrobras to invest more in areas such as wind and solar power, refining and fertilizer production.

In fairness, it was Prates who announced his intention to have 50% of Petrobras’ future revenues come from wind and solar power. He also reduced the company’s dividend payout in order to invest more money in this shift towards transitional energy technologies, which, of course, did not particularly please shareholders.

By Charles Kennedy for Oilprice.com

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