Brazil’s Petrobras Shares in the US Appreciate 17% This Year

Brazilian oil giant Petrobras posted in the first nine months of this year consolidated net profit of 20.7 billion reais (US$ 9.6 billion), a result 33% greater than that registered in the same period last year. The figures were disclosed by the financial and investor relations director at the organization, Almir Barbassa.

The performance was motivated by the increase in production of oil, in the volume of derivatives sold in Brazil and abroad and by the increase of prices of derivatives on the domestic market. This conjunction of factors, in the evaluation of Barbassa, generated growth of 20% in the company’s net operating profit, which reached 117.2 billion reais (US$ 55.2 billion) between January and September.

The volume of oil derivatives traded in Brazil and abroad grew 4%, the prices of these products in the country rose 13%, and production of oil and natural gas liquids (NGL) was 6% greater. Petrobras informed, however, that the organization maintained a price policy aligned to the international market in the medium term, avoiding the transfer of seasonal or local variations to the consumer market.

"Considering the appreciation of the real (the Brazilian currency) in this period, of 13%, the increase (in the price of derivatives) accompanied the price variation on crude oil on the foreign market," he said.

The state-owned oil company’s investment up to September this year totalled 22.6 billion reais (US$ 10.5 billion), a record value for the period and 34% greater than that registered in the first nine months of last year.

However, the first three quarters of 2006 were accompanied by reductions of net debt, which dropped from 24.8 billion reais (US$ 11.5 billion) on December 31, 2005 to 19.6 billion reais (US$ 9.1 billion) on September 30, 2006.

According to Barbassa, the result is the fruit of "great cash flow generation" in the period, which reached 40.7 billion reais (US$ 18.8 billion), 18% more than the 34.6 billion reais (US$ 16 billion) generated in the same period in 2005.

Greater export

The company had in the period a surplus of US$ 152 million in its trade balance, against a deficit of US$ 324 million in the first nine months of last year. Exports generated US$ 8.775 billion, whereas imports reached US$ 8.623 billion. In the same period in 2005, exports reached US$ 6.420 billion, against imports of US$ 6.744 billion.

In the capital markets, the company’s ordinary and preferential shares presented, respectively, appreciation of 9.81% and 9.08%. This result once again exceeds the average market performance, as the Ibovespa (the index of the São Paulo stock market, the largest in Brazil) rose 8.95% in the same period.

The figures show that the ADRs (papers issued and traded only in the United States, representing property of shares of Brazilian companies) issued by Petrobras presented appreciation of 17.62% (ordinary) and 16.27% (preferred) in the first nine months of the year, also growing more than the Dow Jones index in the period (8.97%). The company’s market value reached 190.1 billion reais (US$ 87.9 billion) at the end of September, representing an increase of 13% in comparison to the value at the end of September of 2005.

The increase in international and national prices of oil derivatives also influenced the Petrobras performance in the third quarter. Between July and September, the state-owned organization had net consolidated profit of 7.1 billion reais (US$ 3.3 billion), an increase of 26% when compared to the same period in 2005. Net operating revenue reached 43.4 billion reais (US$ 20 billion).

The Brazilian production of oil rose only 3%. According to Petrobras, this took place due to "delays in the production of platforms P-50 (Albacora) and FPSO Capixaba (Golfinho)". However, the return to production of these units brought Brazil to record daily production in October 2006, exceeding 1.9 million barrels.

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