Petrobras reverses profit and has a loss of R $ 48.5 billion in the first quarter of 2020

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SÃO PAULO – Petrobras (PETR3; PETR4) recorded a net loss of R $ 48.523 billion in the first quarter of 2020, reversing the profit of R $ 4.031 billion presented in the same period last year.

In a release, the state-owned company said that this loss was due to “impairment arising from the review of the long-term premises for Brent in the face of the new world scenario”, in the amount of R $ 65.3 billion.

“Our results were also impacted by the drop in Brent and the losses from exchange rate variations resulting from the strong devaluation of the real against the dollar. These factors were mitigated by higher export volumes, higher margins on derivatives, lower expenses, including general and administrative, exploratory and tax expenses, as well as gains with hedge ”, explained Petrobras.

If the effects of this impairment and a goodwill on the repurchase of bonds are disregarded, Petrobras would have a loss of R $ 4.6 billion in the first three months of 2020.

The sales revenue of the state-owned company increased slightly by 6.5% in one year, from R $ 70.856 billion to R $ 75.469 billion in the first three months of this year. In comparison with the fourth quarter of 2019, revenue decreased 7.7%.

According to the company, this quarterly drop was due to the drop in the price of brent oil and the lower sales volume of oil products in the domestic market, especially diesel, gasoline and QAV.

“These products were the most affected by the impacts of the social isolation measures implemented due to COVID-19 as of March. Diesel, gasoline and LPG also suffer seasonal effects in the period, since the fourth quarter has greater industrial activity and lower temperatures. Natural gas revenues fell 13% due to the drop in demand and price, ”said the company.

Adjusted Ebitda (earnings before interest, taxes, depreciation and amortization), in turn, advanced 36.4%, ending the first quarter at R $ 37.504 billion.

Impairment of R $ 65.3 billion

In the first quarter, Petrobras assessed the economic recoverability of its assets and impairment losses in the amount of R $ 65.3 billion were recognized.

This amount is basically divided between two factors: (i) the effect of a new set of planning assumptions on the recoverable value of several E&P fields (R $ 57.619 billion), mainly in Roncador, Marlim Sul, North Pole, Albacora Leste , Polo Berbigão-Sururu, Polo CVIT and Mexilhão; and (ii) hibernation of fields and platforms in shallow waters (R $ 6.625 billion), affecting the North, Ceará-Mar and Ubarana Poles and the Caioba, Guaricema and Camorim fields.

The impairment of the shallow water fields corresponds to 100% in the book value of these assets, which had an average production of 23Mbpd, the company said.

The state-owned company pointed out that two major events had adverse effects on the market: the Covid-19 pandemic, which brought down demand, and also the failure in negotiations by OPEC + members about production cuts.

These events led the company to adopt a series of measures aimed at preserving cash generation, in order to reinforce its financial strength and resilience of its businesses.

In addition, the company was led to review and approve in its Executive Board some key assumptions of its Strategic Planning, such as Brent price, exchange rate, among others, the most relevant being the projection of oil, which changed from US $ 65 / bbl to $ 25 this year, with an expected rise of $ 5 a year through 2024.

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