Total Debt now Exceeds $100 Billion
The long awaited financial results of supergiant Petrobras (ticker: PBR) were finally issued on April 22, 2015. The end result: $16.8 billion in write-offs, including $2.5 billion in charges directly related to bribery and money laundering. The release is the first time PBR has reported results in roughly eight months when auditors declined to sign off on financial statements. The “Lava Jato Operation” (or Operation Car Wash) was placed into action late last year by local police.
The U.S. Securities and Exchange Commission is carrying out a civil investigation and is cooperating with the Brazilian government. According to CNN, more than 80 people have been charged in the scheme and dozens more are still under investigation. The guilty party is littered with government officials and high-ranking PBR executives.
Brazil’s recently re-elected President Dilma Rousseff served as Petrobras’ Chairwoman prior to winning her first term beginning in 2010. Cries for her impeachment have grown louder amidst the scandal, and her approval rating fell to 36% last month, according to The Wall Street Journal.
The Most Indebted Oil Major in the World
With the inclusion of the write-offs, PBR lost approximately $7.5 billion in 2014 after reporting $10 billion in earnings in 2013. Its total debt, as reported on its Q4’14 results, is $132.1 billion, inclusive of both current and non-current debt. Total cash and cash equivalents amount to about $25 billion, including the addition of government bonds. The company holds a net debt/EBITDA ratio of 4.77x. It will not be paying a dividend in the near future in order to secure additional cash.
The conference call was largely filled with promise and optimism of carrying out its organic growth projects. Details on the past leading up to the scandal were not addressed by PBR management or brought up in the Q&A session. In an interview with The Wall Street Journal, Ivan Monteiro, Chief Financial Officer of Petrobras, said the company would consider “any opportunity” to raise cash but will not be issuing any new shares.
Its 2015 capital plan is fully funded, and management said it is “working on 2016.” Petrobras’ Annual Shareholder Meeting is scheduled for April 29, 2015 in Rio de Janeiro.
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