The worst annual result in eight years has prompted Petrobras to cut its common-share dividend as it sought to preserve cash to maintain investments as fuel and refining losses mount, executives said on Tuesday.
Common shares of the Brazilian state-led oil company fell 8.2 per cent on Tuesday in Sao Paulo, reaching their lowest level since late 2005, according to Reuters.
Petrobras chief financial officer Almir Barbassa said the company would save about 3.5 billion reais ($1.77bn) with the common share dividend cut, which would help keep its planned $237bn five-year investment plan on track.
“The amount saved is about what it costs for an oil platform that can produce about 150,000 barrels of oil a day,” Reuters quoted chief executive Maria das Graças Foster telling investors on a conference call from Rio de Janeiro.
“Not making the investment would cause losses, hurt future cash flow.”
Petrobras had previously paid equal dividends to common and preferred shareholders, though that is not required under the law or the company’s by-laws.
While most Petrobras shares are held by non-government investors, the government controls the company through a majority holding of common stock.
Petrobras cash generation has been squeezed in recent years as the government, which owns a majority of voting shares, prevented the company from raising fuel prices in line with world prices.
Rising demand at home and refineries working near full capacity forced the company – the only refiner in the world’s sixth largest economy – to import fuel at world prices and sell it at home at a loss, Reuters reported.
Despite gasoline and diesel price hikes in June, July and on 30 January, Foster said a gap still remained between domestic and international prices.
“(2012) was an extremely difficult year,” Foster said on the conference call.
“The year 2013 will be even more difficult, especially in the first half,” she added.