Petrobras’s 1Q16 Earnings Were in the Red
Interest Expense and Forex Loss Weigh on Petrobras in 1Q16
Petrobras’s 1Q16 estimated and actual performance
Petroleo Brasileiro (or Petrobras) posted its 1Q16 results on May 12, 2016. Before we proceed with the 1Q16 earnings review, let’s look at PBR’s 1Q16 performance versus estimates.
In 1Q16, Petrobras posted adjusted EPS (earnings per share) of -$0.05 compared to analysts’ estimates of $0.01. The lower-than-expected EPS resulted from a fall in earnings across its business segments in 1Q16 over 1Q15. Petrobras’s refining segment earnings fell in 1Q16 compared to 1Q15 but stayed positive. The segment contributed a major portion of Petrobras’s first quarter earnings.
Petrobras’s first quarter earnings review
Petrobras (PBR) posted a net loss of $318 million in 1Q16 compared to earnings of $1.9 billion in 1Q15. This was on account of a decline in crude oil prices. Plus, crude oil and natural gas production volumes fell by 7% over 1Q15 to 2,616 thousand barrels of oil equivalent per day in 1Q16. Petrobras also reported impairments to the tune of $75 million in 1Q16 on account of the termination of a contract in the Bijupira and Salema fields.
PBR posted a loss in the exploration and production segment. Plus, losses in the distribution and biofuels segments further dented its earnings. This was partly offset by earnings in gas and power, and refining, transportation, and marketing segments. But, in 1Q16, a combined interest expense and foreign exchange loss of $2.5 billion weighed heavily on Petrobras’s earnings.
Petrobras peers Royal Dutch Shell (RDS.A), Exxon Mobil (XOM), and BP (BP) posted 58%, 63%, and 78% lower adjusted EPS in 1Q16 compared to 1Q15, respectively. Plus, Chevron (CVX) reported a loss in 1Q16. For global stock exposure, you could consider the Vanguard Total World Stock ETF (VT).
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