Brazil’s state-owned oil giant, Petrobras, is open to the possibility of issuing extraordinary dividends this year if favorable conditions arise, according to Chief Financial Officer Fernando Melgarejo. Speaking during an earnings call on Friday, Melgarejo indicated that any decision on additional payouts would hinge on the company’s cash position and future cash-generation capacity.
Weaker Earnings but Strong Dividend Payouts
The announcement comes on the heels of Petrobras reporting disappointing second-quarter results, which saw a net loss of 2.6 billion reais ($472.22 million). Despite the losses, the company proceeded with dividend payments totaling 13.57 billion reais, partially funded by drawing 6.4 billion reais from its capital reserves. This decision to maintain dividends even during challenging financial times was seen as a positive signal to investors.
Jefferies analysts described the earnings call as delivering a “reassuring message,” noting that Petrobras’s production levels remain within guidance despite operational challenges, including platform stoppages and difficulties in securing environmental licenses.
Petrobras has revised its 2024 capital expenditure estimates downward, primarily due to strategic adjustments in exploration and production activities, as well as delays in refining investments. CFO Melgarejo indicated that the company plans to increase its investments in 2025 compared to this year, suggesting a cautious but forward-looking approach to capital allocation.
Analysts from BTG bank suggested that the reduction in 2024 investment estimates could potentially pave the way for extraordinary dividend payments, adding to investor optimism despite the short-term financial setbacks.
Market Reaction and Outlook
Following the news, Petrobras’s preferred shares traded on the São Paulo stock exchange experienced volatility, initially dropping by as much as 3.4% during morning trading. However, the shares later recovered, closing the day down just 0.5%, reflecting a mixed but generally resilient market response to the company’s earnings and strategic outlook.
As Petrobras navigates through a challenging economic landscape, its commitment to shareholder returns, coupled with a cautious investment strategy, will be closely watched by the market. The potential for extraordinary dividends adds a layer of interest as the company balances its short-term financial pressures with long-term growth ambitions.
Source: Reuters
