Petrobras Misses on Q2 Earnings as Exploration Costs Rise - Analyst Blog
Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras ( PBR ), announced second-quarter profit of $2,225 million, reflecting a decrease from $2,996 million in the year-earlier quarter. Earnings per ADR came in at 36 cents (1 ADR = 2 shares), lower than the year-ago profit of 46 cents and below the Zacks Consensus Estimate of 49 cents.
Significant higher exploration expenses hampered the results. Moreover, cap on pump prices, fixed by the government, impacted the company's profit considerably.
Petrobras' net operating revenues of $36,910 million were above the year-earlier level of $35,569 million, owing to higher total production.
Upstream: Petrobras' total oil and gas production during the second quarter reached 2,600 thousand oil-equivalent barrels per day (MBOE/d), up from 2,555 MBOE/d in the corresponding quarter of 2013.
Compared with the second quarter of 2013, Brazilian oil and natural gas production increased 2.7% to 2,383 MBOE/d. However, international production came in at 217 MBOE/d, lower than 235 MBOE/d in the year-ago period.
The average sales price of oil in Brazil increased 5.2% from the year-earlier quarter to $99.02 per barrel. On the flip side, average sales price of international oil was down 2.3% year over year, to $87.91 per barrel.
Increased total output pushed up the upstream (or exploration & production) segment profit by 12% to $7,384 million. To some extent, the upside was arrested by a 38.6% increase in Petrobras' exploration costs, which totaled $808 million.
Average international natural gas sales price fell 4.5% from the second quarter of 2013, while domestic price was down 1.7%.
Lifting cost per barrel (or cost to produce each barrel of oil) was down 3% in Brazil to $14.57, however overseas costs increased 2.1% to $8.93.
Downstream: During the second quarter, Petrobras' downstream unit incurred a net loss of $2,653 million, wider than the loss of $1,790 million a year ago. Government has put a cap on the pump prices that hindered the company's downstream profit to a great extent.
Refining costs per barrel in Brazil were down by 4.6% to $2.94. Internationally, the price was $3.76, same as the previous quarter.
Petrobras imported an average of 534,000 barrels of oil per day, 19.5% higher than the same quarter last year. Moreover, oil product imports were almost 60% above the year-earlier quarter.
Capital Spending & Balance Sheet
During the three months ended Jun 30, 2014, Petrobras' capital investments and expenditures totaled $9,382 million. At the end of the quarter, the company had cash and cash equivalents of $26,397 million and net debt of $109,580 million. Net debt-to-capitalization ratio was approximately 40%.
Zacks Rank & Stock Picks
Petrobras 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 better-ranked players in the energy sector like Patterson-UTI Energy Inc. ( PTEN ), Pioneer Energy Services Corp. ( PES ) and Cameron International Corporation ( CAM ). All the stocks sport a Zacks Rank #1 (Strong Buy).
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