Petrobras has taken a 65.3-billion Brazilian real ($11.2-billion) impairment on its exploration and production (E&P) assets, warning investors that changes in consumer behavior resulting from the coronavirus pandemic would likely be permanent.
The impairment led the firm to book a first-quarter net loss of 48.5 billion reais. The company wrote off the entire value of its shallow-water assets and said it did not expect to resume production at six high-cost production assets currently for sale.
Total impairments came to 57.6 billion reais for its deepwater assets, including the massive Marlim Sul oil field, and 6.6 billion reais at its shallow-water fields. Other unspecified assets comprised the remaining 1.1 billion reais of writedowns.
The company is now assuming long-term Brent prices of $50/bbl, vs. a previous assumption of $65. It projected that 2020 Brent prices would average $25/bbl and increase $5 every year until reaching $50 in 2025.
It added that it was now revising all E&P projects to make sure they make economic sense given the new pricing assumptions.
Petrobras reported recurring earnings, before interest, taxes, depreciation, and amortization, adjusted for some one-off factors, of 36.9 billion reais, above the Refinitiv consensus estimate of 32.9 billion reais.
Still, Petrobras Chief Executive Roberto Castello Branco noted the company’s debt increased “only $2.1 billion” in the quarter.
The company’s divestment program, including its sale of eight refineries, by far the largest ongoing divestment, was still intact. A significant part of the contracts should be concluded by year end.
