This summary is based on the first quarter fiscal 2007 earnings call conducted by Petroleo Brasileiro (PBR) on May 15, 2007.
Chief Financial Officer and IR Officer: Almir Guilherme Barbassa
IR Executive Manager of Petrobras: Raul Campos
Key Investors Issues
- Net income was R$4.131 million, a fall of 38% over the prior year quarter.
- Consolidated net operating revenue increased 8% over last year to R$38.89 million.
- In Q1, domestic oil and NGL production averaged 1.800 thousand barrels/day.
First Quarter Fiscal 2007 Financial Highlights
The loss of production had the small decrease and this was mainly due to the stoppage of P-37 platform.
P-37 is a platform that is produced in the mining field. It was programmed to have a stoppage but this stoppage had longer duration better than expected, it remained with no production during Saturday. It is being the platform that is producing one of the company’s last year’s oil field caused problems in the production. Besides that, the firm has the increase in production P-34 and FPSO Capixaba in the Golfinho field also this much progress as much as we were focusing. All added led the firm to average production of 1,800 million barrels of oil per day, which means 1.2% less than the last quarter of 2006. But the total production of Petrobras since the beginning of 2006 has increased 1.2 regardless the decrease of the first quarter of this year. The firm hopes that it can achieve the target it has for the year.
There has some decrease in the oil prices.
Since the last quarter, it was a small decrease but it caused the firm to lower income from production. It was less than the first quarter of 2006, the oil price decreased by 11%. Since the first quarter, it is less than 1%.
The refining and sales in Brazil performed very well.
The refining has increased and the total domestic oil products production increased that is enough to make the 9% of the firm’s installed capacity in Brazil. The firm had a very good performance on the refining. In the sales, it was larger volume than the first quarter of 2006, but seasonally adjusted. This is less than the first quarter of 2006, which is a much better quarter to sell oil products in Brazil than the first quarter.
In terms of dollars, the average realization of prices increasing since the first quarter of 2006, but the average realization price has decreased this year first quarter, and this caused the firm some loss in revenues.
The firm had a reduction in net revenues when compared with last quarter of 2006.
But this was due to the oil production reduction, the sales reduction, the average realization price reduction. But when you see the cost of goods sold, the firm had a reduction as well, what led to a larger EBITDA, and the cost of goods sold reduction was due to the reduction in the production cost, refining cost and G&A cost. The reduction in all these costs led the firm to an operational profit larger in the first quarter than last one. However, the company had a net income that was shorter when compared with fourth quarter. There are some reasons.
The interest on capital that was declared in the fourth quarter. All the interest on capital was responsible for a reduction in income tax of about 2 billion Reais because the firm declared 6 billion Reais roughly in the first quarter, what means 6 billion times to 34% hich means about 2 billion Reais of income tax reduction, what was an increase in the net income of the first quarter.
The first quarter on the contrast, the firm had no interest on capital to benefit the net income in this field, but the firm had few extra expenditures and the largest trend was the pension plan. The company spent 1 billion Reais to head its plans in place. Besides that, the firm had exchange in debt of the company and it exchanged old debt by new issues. This caused the firm a net effect cost as well. All these together led to a net income shorter in the first quarter of 2007 when compared with the last one of 2006.
There is still another point that helped to reduce the net income of the first quarter, this was the financial expense based on the foreign exchange variation. The firm had larger appreciation for real in the first quarter than in the last quarter of 2006. In the first quarter of 2007, the firm had more liquid assets in dollars than it had at the end of the year. This caused the firm a LIBOR loss in the first quarter than in the last one of 2006. This was not because of the reduction in the net income.
Operational expense behaved very well.
The firm had a reduction in all kind of expenses due to the reduction on the oil price, due to reduction of production costs, refining costs, personnel, G&A all have contributed to reduce the operational expense of the company except for the last one that is orders, where is the cost of pension plan. Orders is included the cost of the pension plan and it was about 1 billion real. If you deduct 1 billion real from 1.8, you can see that there were interests and lot of reduction in the orders as well.
