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Petrobras (PBR) Slips to Loss in Q1 Amid Low Oil Prices

Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras PBR, announced first-quarter loss of $318 million against profit of $1,862 million in the year-earlier quarter. Loss per ADR came in at 4 cents (1 ADR = 2 shares), while the company had reported profit of 28 cents in the year-ago quarter. Lower production along with weak commodity prices led to the underperformance.  

However, the struggling oil producer’s bottom line came in narrower than the Zacks Consensus Estimate of loss of 8 cents thanks to higher diesel and gasoline margins.

Petrobras’ net operating revenues of $17,989 million were 31% less than the year-earlier level of $25,967 million.   

Segmental Performance

Upstream: The Rio de Janeiro-headquartered company’s total oil and gas production during the first quarter was 2,616 thousand oil-equivalent barrels per day (MBOE/d), down from 2,803 MBOE/d in the same period of 2015. Brazilian oil and natural gas production decreased 7% to 2,435 MBOE/d and international volumes fell 3% year over year to 181 MBOE/d.  

During the three months ended Mar 31, 2016, the average sales price of oil in Brazil plunged 33% from the year-earlier period to $28.88 per barrel. Average sales price of international oil was down 29% year over year to $41.59 per barrel. Regarding natural gas, average international sales price improved 4% from the first quarter of 2015, while domestic price was down 26%.      

Decline on the production front along with a sharp fall in commodity prices resulted in a loss of $154 million in this quarter. In the year-earlier quarter the company had reported a profit of $1,191 million.

Downstream: During the first quarter, Petrobras’ downstream unit earned $2,041 million, down 6% from the year-earlier quarter figure of $2,160 million. Foreign translation effects led to the downfall. This underperformance was negated partially by lower crude prices along with higher diesel and gasoline margins.

Among other information, refining costs per barrel in Brazil were down 20% to $2.27. Internationally, it increased 3% to $4.01. Petrobras imported an average of 199,000 barrels of oil per day, 28% lower than the same period last year. Moreover, oil product imports were 17% less than the year-earlier period.  

Capital Spending & Balance Sheet

During the three months ended Mar 31, 2016, Petrobras’ capital investments and expenditures totaled $3,987 million. At the end of the quarter, the company had cash and cash equivalents of $21,855 million and net debt of $126,447 million. Net debt-to-capitalization ratio was approximately 58%.       

Zacks Rank & Stock Picks

Petrobras currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include McDermott International Inc. MDR, PetroChina Co. Ltd. PTR and Murphy USA Inc. MUSA. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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