RIO DE JANEIRO: Brazil's state-run oil company Petroleo Brasileiro SA beat analyst forecasts on Friday, posting first-quarter profit little changed from a year earlier, as an end to fuel subsidies helped overcome a plunge in crude prices.
Petrobras, as the company is known, also cut investments by 13 percent after a massive corruption scandal forced it to stop paying or hiring about two dozen key construction and engineering companies.
The scandal, in which prosecutors say contractors overcharged for work with the excess used for political bribes, has led to the resignation of nearly all Petrobras' top executives, a 6.2 billion reais ($2.1 billion) writedown and the paralysis of much of the company's activity since November.
Less activity helped Petrobras cut operating costs 22 percent as it looks to control its soaring debt load. The company is in a bid to regain investor confidence after a nearly$9 billion loss in the fourth quarter, the biggest in its history.
"The result was very positive," said Chief Financial Officer Ivan Monteiro. "This process, it will take a long time, but we hope to slowly regain the confidence of investors."
Petrobras profit in the three months ended March 30 fell 1.2 percent to 5.33 billion reais ($1.8 billion) compared with 5.39 billion reais a year earlier, according to a filing with Brazil's securities regulator CVM.
The result exceeded expectations of a 2.5 billion-real quarterly profit, the average estimate of seven analysts surveyed by Reuters. One of the analysts predicted a net loss.
Petrobras also reported net sales, or sales minus sales taxes, of 74.4 billion reais, broadly in line with expectations of 79.4 billion reais.
While a 49 percent decline in the price of oil erased the impact of an 11 percent increase in crude output, the crude-price impact was offset by savings resulting from an end to fuel subsidies.
The resulting gain helped boost operating results measured by EBITDA, or earnings before interest, taxes, depreciation to 21.5 billion reais in the quarter, more than a third higher than the 16 billion reais expected in the survey.
Fuel import costs have fallen with the price of gasoline and diesel in world markets by bringing import costs in line with domestic prices.
In recent years, Petrobras lost more than 60 billion reais subsidizing domestic fuel because the government, trying to control inflation, kept prices below world levels.
After the company faced a cut-off from financial markets after the corruption scandal forced it to delay the release of third-quarter results, the government finally relented and granted Petrobras a 5 percent increase in diesel and 3 percent in gasoline in November.
For the whole first quarter, domestic prices were above international prices, ending the subsidy and helping the refining unit turn 6.18 billion real profit, one of its first in years. A year earlier, the unit lost 4.81 billion reais.
The good refining result helped make up for the impact of the 18 percent decline in the average value of Brazil's real against the U.S. dollar.
The decline caused the local-currency value of Petrobras' dollar debts to soar, adding to non-operating financial losses.
Petrobras, the world's most indebted major oil company, saw its debt in reais jump 14 percent compared with the end of the fourth quarter to 400.4 billion reais. In dollars its debt fell 2 percent to 103.6 billion.
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