Brazilian state-run energy giant Petroleo Brasileiro S.A. (PBR), or Petrobras S.A. announced encouraging fourth quarter results, helped by rebounding oil prices and lower operating expenses. Earnings per ADR came in at R$1.86 ($1.04), comfortably ahead of the Zacks Consensus Estimate of 90 cents. For 2009, Petrobras earned R$6.60 ($3.67) per ADR, again beating our estimate of $3.27.
The company’s strong fourth quarter results were in contrast to the year-over-year earnings decline suffered by other energy majors like ExxonMobil Corp. (XOM), Chevron Corp. (CVX), and Royal Dutch Shell PLC (RDS.A). 
However, Petrobras’ net operating revenues of R$47.6 billion was down 8.6% from the fourth quarter 2008 level, reflecting lower domestic realizations for refined products that make up about half of Petrobras’ sales.
Total oil and gas production during the fourth quarter of 2009 reached 2,561 million oil-equivalent barrels per day, from 2,534 million in the previous quarter and 2,428 million in the same period of 2008.

Compared to the fourth quarter of 2008, Brazilian oil and natural gas liquids production increased 6.9%, while international production was up 18.2%. However, Brazilian natural gas volumes were down 3.0% from the year-ago period, while international output during the quarter was down 2.0% year over year.
During the fourth quarter of 2009, the average sales price of oil in Brazil increased 46.5% from the year-earlier period to $70.24 per barrel. Average sales price of international oil was up 35.9% year-over-year, reaching $64.39 per barrel. Regarding natural gas, average international sales price decreased 19.4% from the fourth quarter of 2009, while domestic price was down 55.4%.
Refining costs per barrel in Brazil were up 61.4% to $3.76. However, internationally it fell 17.0% to $3.07. Lifting cost per barrel moved up 36.6% in Brazil to $24.74, while overseas costs rose 21.1% to $6.49. Petrobras exported an average of 678,000 barrels of oil per day, 14.2% lower compared to the same period last year.
Capital Spending & Balance Sheet
During 2009, Petrobras’ capital investments totaled R$70.8 billion. At the end of the December quarter, the company had cash and cash equivalents of R$28.8 billion and a long-term debt of R$85.1 billion.
Four-Year Investment Plan Boosted
The company projected investments in the range of $200 – $220 billion during the four-year period 2010 – 2014, mainly to develop new oil fields. This is up from $174.4 billion earmarked for 2009 – 2013.
Plans Share Offer by July
Petrobras further informed that it expects to complete its much-anticipated capitalization plan by end-July. The company may issue around $50 billion in new stock, the bulk of which will go to the government in exchange for the oil rights. The capital infusion will help Petrobras to undertake exploration projects in the oil-rich pre-salt reserves.
Segment Performance (2009)
The E&P segment earned R$19.6 billion during 2009, down 47.9% year over year, reflecting lower oil prices, somewhat negated by the 6.3% increase in average daily oil and NGL production and the lower government take.
Segment earnings came in at R$13.3 billion as against a loss of R$3.6 billion in 2008. The improvement over the previous year can be attributed to lower oil acquisition /transfer costs and reduced imported oil product costs, partly offset by lower export prices and, in Brazil, to the reduced price of those oil products pegged to international prices.
Gas & Energy
During 2009, Gas & Energy segment’s income reached R$914 million, compared to a loss of R$315 million in the year earlier. The positive comparison was due to reduced energy purchase costs, the greater availability of energy for trading, increased fixed revenue from auctions, and a reduction in the natural gas import/transfer cost. Partly offsetting these factors were reduced thermal power output.
Earnings in Jan – Dec 2009 reached R$1.3 billion, up slightly (by 1.6%) from the same period previous year. The upturn in the operational results reflect a 13% increase in sales volume, mainly on the back of the inclusion of the commercial activities of Alvo Distribuidora. This was partly cancelled by narrowing of sales margins due to lower average sales price.
Petrobras’ International segment lost R$220 million during 2009, much narrower than the loss of R$1.9 billion in 2008. The year-over-year improvement came because of increased gross profit on the back of enhanced refining margins in the U.S. and Japan as well as higher oil sales volume, partially offset by lower international prices.


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