Falling Oil Prices and Lower Domestic Demand Cut Brazil’s Petrobras Profit 20%

Petrobras gas station in Amazonas state, Brazil The retraction in demand in the domestic market and a 55% reduction in the price of the Brent barrel of oil, which fell from US$ 97 in the first quarter of 2008 to US$ 44 in the first quarter of 2009, caused a 20% reduction in the net profit of Petrobras when compared to the first quarter of 2008 and 6% retraction in the fourth quarter of last year.

The information was supplied by the Financial and Investor Relations director at the state-owned company, Almir Barbassa. To him, the reduction was only not greater due to a 7% expansion in production of oil in national fields – when comparing the first quarter of 2008 to the first quarter of 2009 -, despite maintenance of prices of the main derivatives, which did not accompany price drops abroad.

"The reduction of the net price was not only greater due to the price policy practiced by the company and also due to the increase in production: we had a significant increase; 7% is an unprecedented expansion in the world today. If you search among other oil companies, you will not find this growth of production."

From January to March this year, the numbers disclosed by Petrobras show that the net profit of the state-owned company reached 5.816 billion reais (US$ 2.8 billion), with investment reaching 14.380 billion (US$ 7 billion), growth of 41% over the first quarter of 2008.

According to Barbassa, the investment was supported by a high cash flow, which reached 13.423 billion reais (US$ 6.5 billion) – a 5% higher result. Despite the lower net profit, the Petrobras market value rose 27.3% in the first three months of the year, having reached 285.151 billion (US$ 138.6 billion).

Barbassa stated that the reduction in the average price of the barrel of oil alone caused the company to post losses of 4.3 billion reais (US$ 2 billion). Production of oil and natural gas in Brazil reached 2.261 million barrels of oil equivalent per day in the first quarter this year.

Petrobras ascribes the result to the entry into operation of platforms P-53 (East Marlim), P-51 (South Marlim) and FPSO Cidade de Niterói (East Marlim), and to the increase in output of units P-52 and P-54, in Roncador, all of which are located in the Campos Basin, in the North of the state of Rio.

Not counting gas, oil output in Brazil from January to March averaged 1.952 million barrels per day. On May 4th, a record-high daily oil output was achieved: 2.059 million barrels.

As for the state-owned company's refineries, an average of 1.759 million barrels were processed per day (91% of installed capacity), and 1.771 million barrels/day of derivatives were produced.

ABr

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