Brazil's state-run energy giant
Petroleo Brasileiro S.A.
), announced fourth quarter profit of R$7.7 billion or R$0.59 per
share, compared with R$5.0 billion or R$0.39 in the year-earlier
quarter. Earnings per ADR came in at 58 cents (1 ADR = 2 shares),
above the year-ago profit of 44 cents and in line with the Zacks
The company's results were helped by higher financial gains and
lower taxes, partially offset by rising operational costs, weak
production, unfavorable exchange rate fluctuations and high
priced fuel imports to meet the country's growing demand.
Petrobras' net operating revenues of $35.7 billion surpassed the
Zacks Consensus Estimate of $34.9 billion but were below the
year-earlier level of $36.3 billion amid higher domestic fuel
Total oil and gas production during the fourth quarter reached
2,614 thousand oil-equivalent barrels per day (MBOE/d), down from
2,670 MBOE/d in the same period of 2011.
Compared with the fourth quarter of 2011, Brazilian oil and
natural gas production decreased 1.6% to 2,378 MBOE/d, while
international production came in at 236 MBOE/d (as against 254
MBOE/d in the year-ago period).
For the year ended Dec 31, 2012, production of natural gas and
crude oil reached 2,598 MBOE/d, down 0.9% from 2011.
During the fourth quarter of 2012, the average sales price of oil
in Brazil decreased 2.5% from the year-earlier period to $100.56
per barrel. Average sales price of international oil was down
3.8% year over year, reaching $93.43 per barrel. Regarding
natural gas, average international sales price fell 35.2% from
the fourth quarter of 2011, while domestic price was down 13.1%.
Exploration costs skyrocketed 43.3% to R$2.2 billion. This pushed
down the upstream (or exploration & production) segment
profit by 4.5% to $8.6 billion.
Lifting cost per barrel (or cost to produce each barrel of oil)
moved up 11.6% in Brazil to $13.94, while overseas costs jumped
47.3% to $10.34.
During the fourth quarter, Petrobras' downstream unit incurred a
net loss of $4.2 billion, significantly wider than the loss of
$3.3 billion a year ago. This was due to the company's inability
to shift the burden of rising oil costs to its consumers, as
mandated by the state policy of keeping a lid on gasoline and
Though the Brazilian government has come up with several decision
to hike domestic fuel prices during the last few quarters, those
were not enough to offset Petrobras' refining losses. Higher
product import cost - reflecting unfavorable currency movements -
also hampered results.
Refining costs per barrel in Brazil were down by 20.0% to $3.81.
Internationally, it increased 7.3% to $4.87. Petrobras imported
an average of 806,000 barrels of oil per day, 4.1% higher
compared to the same period last year.
Capital Spending & Balance Sheet
During the three months ended Dec 31, 2012, Petrobras' capital
investments totaled R$24.3 billion, bringing the full-year
spending to R$84.1 billion. At the end of the quarter, the
company had cash and cash equivalents of R$27.6 billion and net
debt of R$147.8 billion. Net debt-to-capitalization ratio was
As of year-end 2012, the company - Latin America's largest - had
approximately 16.44 billion barrels of oil equivalent (BBOE) in
proved reserves (as per SPE or Society of Petroleum Engineers
Stocks to Consider
Petrobras - which aims to surpass
Exxon Mobil Corporation
) by 2020 to become the world's largest oil producer - currently
carries a Zacks Rank #3 (Hold), implying that it is expected to
perform in line with the broader U.S. equity market over the next
one to three months.
Meanwhile, one can look at France-based integrated supermajor
) and domestic energy explorer
Cabot Oil & Gas Corporation
) as attractive investments. Both these companies - sporting
Zacks Rank #1 (Strong Buy) - offers value and are worth
accumulating at current levels.
CABOT OIL & GAS (COG): Free Stock Analysis
PETROBRAS-ADR C (PBR): Free Stock Analysis
TOTAL FINA SA (TOT): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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