Petrobras Announces $10 Billion Quarterly Loss
Brazilian state-owned oil firm Petrobras has announced an unexpected, severe loss of $10 billion for the fourth quarter, due largely to asset write-downs on its oil fields.
The writedown on the fields is not the first. Last year, the firm was forced to redefine its recoverable reserves, cutting their volume by 20 percent, as the drop in oil price makes some offshore finds uneconomic to develop.
Falling oil prices have forced many offshore operators and oil companies to book impairments on the value of their capital assets, including vessels and rigs, under accounting rules requiring them to count the decline in holdings’ market values as losses.
On average, analysts had expected Petrobras to post a profit in the range of $1 billion. Asset impairments came to $13 billion, dragging the bottom line well below expectations.
The quarterly loss is Petrobras' largest ever, equal to more than a third of its market capitalization, and is enough to create a loss for 2015 overall. For a second year in a row, Chief Executive Officer Almir Bendine said, Petrobras will not pay dividends to either its government or non-government investors and it plans to make no bonus payments to employees.
Sources close to management have leaked news of 12,000 voluntary layoffs planned as part of the firm's upcoming revision of its five year strategic plan, and it intends asset sales to raise additional funds, including the disposal of two subsidiaries and the sale of offshore leases.
In addition to low oil prices, two additional factors hamper Petrobras' outlook: it is the world's most indebted oil company, and it is hampered by a long-running "pay-to-play" corruption scandal involving the exchange of bribes for overpriced contract terms - a controversy that has affected the firm's reputation and brought turmoil to the highest levels of Brazil's government.
Petrobras is Brazil's largest company and largest investor, and its cutbacks are deepening the nation's recession, already the worst in decades.