Brazil's state-run energy giant Petroleo Brasileiro S.A., or Petrobras (PBR - Analyst Report), announced first quarter profit of $3,854.0 million, compared with $5,212.0 million in the year-earlier quarter. Earnings per ADR came in at 60 cents (1 ADR = 2 shares), below the year-ago profit of 80 cents and in line with the Zacks Consensus Estimate amid rising operational costs and weak production. These factors were partially offset by higher domestic fuel prices.
Petrobras’ net operating revenues of $36,345.0 million surpassed the Zacks Consensus Estimate of $33,472.0 million but were below the year-earlier level of $37,410.0 million.
Upstream: Petrobras’ total oil and gas production during the first quarter reached 2,552 thousand oil-equivalent barrels per day (MBOE/d), down from 2,676 MBOE/d in the same period of 2012.
Compared with the first quarter of 2012, Brazilian oil and natural gas production decreased 4.9% to 2,310 MBOE/d, while international production came in at 242 MBOE/d (as against 246 MBOE/d in the year-ago period).
During the first quarter of 2013, the average sales price of oil in Brazil decreased 7.8% from the year-earlier period to $102.91 per barrel. Average sales price of international oil was down 5.7% year over year, to $94.26 per barrel. Regarding natural gas, average international sales price rose 14.2% from the first quarter of 2012, while domestic price was down 9.0%.
Petrobras’ exploration costs increased 12.2% to $642.0 million. This pushed down the upstream (or exploration & production) segment profit by 29.1% to $7,560.0 million.
Lifting cost per barrel (or cost to produce each barrel of oil) moved up 14.3% in Brazil to $14.76, while overseas costs jumped 13.8% to $8.50.
Downstream: During the first quarter, Petrobras’ downstream unit incurred a net loss of $3,276.0 million, 18.4% narrower than the loss of $4,016.0 million a year ago. Petrobras was able to cut its losses on account of the recent decision by the Brazilian government to allow it to raise diesel and gasoline prices. This has helped Petrobras to shift some of the burden of rising oil costs to its consumers.
Refining costs per barrel in Brazil were down by 16.0% to $3.14. Internationally, it increased 17.0% to $3.79. Petrobras imported an average of 860,000 barrels of oil per day, 12.6% higher compared to the same period last year. However, oil product imports were 7.4% less than the year-earlier period, favorable impacting gross margins.
Capital Spending & Balance Sheet
During the three months ended Mar 31, 2013, Petrobras’ capital investments and expenditures totaled $9,907.0 million. At the end of the quarter, the company had cash and cash equivalents of $13,524.0 million and net debt of $74,820.0 million. Net debt-to-capitalization ratio was approximately 31%.
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 some domestic upstream energy firms like EPL Oil & Gas Inc. , Harvest Natural Resources Inc. (HNR - Snapshot Report) and McMoRan Exploration Co. as attractive investments. These U.S. exploration and production companies – sporting a Zacks Rank #1 (Strong Buy) – offer value and are worth accumulating at current levels.