Petrobras has the best quarterly result of the last five years

Petrobras reported a net profit of R$ 6.96 billion in the first quarter of 2018, the best quarterly result since the beginning of 2013, when the company had earned R$ 7.69 billion, and ended the quarter with positive results in its safety metric.

“We are following exactly what we promised in our business plan announced in 2016 and the first quarter results show that the successful choices have been made and that the effort has paid off. With this result, we consolidated the recovery path of Petrobras. Our goal, and there is still much to do, is to arrive in December with a company that has safety indicators among the best in our sector, financially balanced and with its reputation recovered, ”said Petrobras President Pedro Parente.

In the first quarter of 2018, the company reduced the total recordable injuries rate from 1.08 accidents per million worked hours at the end of 2017 to 0.95 accidents per million worked hours, slightly below the 1.0 metric, which was revised for the end of this year. The financial indicator, which is the ratio of net debt to adjusted EBITDA, also improved, down from 3.67 times to 3.52, reaffirming the commitment established in Petrobras’ business plan, a net debt / adjusted EBITDA ratio of up to 2.5 times at the end of the year

The main explanation for the 56% increase in net income for the first quarter of 2018 over the same period last year is the increase in international oil prices, which went from US$ 53.8 in the average of the first quarter of 2017 to US$ 66.8 this year. In addition, the change in international prices also allowed Petrobras to achieve higher margins in oil exports and natural gas sales, as well as in the sale of oil products. The company also realized gains from the sale of the assets of Lapa, Iara and Carcará in the Santos Basin pre-salt.

On the other hand, there was a reduction in sales volume in Brazil (mainly gasoline, due to higher ethanol competition) and a in the volume of exported oil. Third-party import data from the first quarter of 2018, however, indicate that there was a change in the market trend, with a significant reduction in purchases of diesel, which fell from 4,170 thousand cubic meters in the fourth quarter of 2017 to 2,907 thousand cubic meters in the first quarter of 2018, leading to a recovery in Petrobras’ market share, which dropped from 74% in 2017 to 79% in April 2018. Gasoline imports registered a small increase, but the market share of the company increased from 83% in 2017 to 86% in April 2018 (preliminary values).

The rise in international oil prices also led to higher government participation payments, which rose from R$ 6.20 billion in the first quarter of 2017 to R$ 7.97 billion in the same period of this year. The company’s expenses were also affected by the payment of tariffs for the use of the Nova Transportadora do Sudeste (NTS) pipeline and the impact of the variation in the  value of the options contracted to protect the price of part of the oil production.

The performance of the company’s operations maintained a positive trend, which had already been registered in previous quarters, with a 25% higher operating profit relative to the first quarter of last year, totaling R$ 17.82 billion. The highlights were the beginning of production in the Buzios field, physical progress in the construction of the eight platforms that will be installed in Brazil by the end of 2019, 4% increase in exports, lower general and administrative expenses and lower equipment idleness expenses. The company’s net debt decreased to US$ 81.45 billion, a 4% reduction relative to the last quarter. With active liability management, it was also possible to increase the average maturity from 8.62 to 9.26 years and maintain the average interest rate at 6%.

With net income recorded in the first quarter of 2018, Petrobras will remunerate all shareholders in the amount of R$ 0.05 per share. Shareholders distributions were not made since 2014.

Top Metrics

Total recordable injuries rate (TRI) was 0.95. The planned metric for 2018 was 1.0 per million man-hours, but the company was able to anticipate in two years the accomplishment of this indicator in relation to its Strategic Plan.

The net debt/adjusted Ebitda metric has gone down from 3.67 in December 2017 to 3.52 in March, 2018. This was a result of the class action agreement and the tax amnesty programs which affected the fourth quarter of 2017. Without the class action agreement, the net debt/adjusted Ebitda would be 3.07. Leverage also decreased from 51% to 49%.

Shareholder remuneration

Following the Board of Directors’ decision, the company will anticipate the payment of dividends as interest on capital in the amount of R$ 0.05 / share for both classes of shares. Payment will be made on 05/25/2018.

See the highlights

Net Result

Petrobras’ net income for the first quarter of 2018 was R$ 6.96 billion, 56% higher than the first quarter of 2017.

Production

Total oil and natural gas production in the first quarter of 2018 was 2,680 thousand barrels of oil equivalent per day (boed), of which 2,582 thousand boed in Brazil, 4% less than the first quarter of 2017, mainly reflecting the scheduled stoppages and the divestment in Lapa.

Oil products output fell 7% and sales 9% in Brazil, compared to the first quarter of 2017, totaling 1,679 thousand barrels per day (bpd) and 1,768 thousand bpd, respectively. Compared to the fourth quarter of 2017, gasoline and diesel sales decreased due to lower demand, although there was a recovery of market share in diesel, as a consequence of the price adjustments implemented at the end of 2017.

Debt Reduction

The company reduced its net debt by 4% to US$ 81.45 billion, compared to the last quarter.

Exports

Petrobras maintained its net exporting position, with a net balance of 507 thousand bpd in the first quarter of 2018 (compared to 489 thousand bpd in the first quarter of 2017), as a result of the 38% reduction in imports.

Positive free cash flow

Free cash flow remained positive for 12 quarters in a row, reaching R$ 13 billion in the first quarter of 2018, 3% below the previous quarter, mainly due to the payment of the first installment of the class action agreement and the premium for the put options purchased to protect the prices for part of the oil production.

Operating Income

Operating Income reached R$ 17.82 billion in the first quarter of 2018, 25% above the first quarter of 2017.