Petrobras: 2nd quarter dividend should already follow new rule – 07/19/2023 – Market

Petrobras already expects to put into practice its new dividend policy in the disclosure of the result for the second quarter of 2023, scheduled for the beginning of August. The idea is that the new model reduces the value distributed to shareholders, reserving more resources for investments.

The change in dividend policy is one of the campaign promises of the Luiz Inácio Lula da Silva (PT) government, a critic of the policy that led Petrobras to become one of the largest payers in the world during the Jair Bolsonaro (PL) government.

The new distribution rule will be released by the end of the month, according to the company’s Financial Director, Sérgio Caetano Leite. And it should already govern the remuneration of shareholders in relation to the profit of the second quarter – in the first, Bolsonaro’s rule still applied.

The terms are being elaborated by an internal working group, which evaluates the percentages, on which indicators the dividends are levied and the periodicity of distribution. The work, said Leite, considers comparison with other international oil companies.

“The company was being prepared to be sold and, since the decision was to sell, it was interesting to pay a lot of dividends”, said the executive, at the company’s management breakfast with journalists, in Rio de Janeiro.

The current rule, created at the beginning of the Bolsonaro government, provides for the distribution to shareholders of 60% of the difference between cash generation and investment volume.

With cash inflated by expensive oil and falling investments, the company became a “cash cow”, as good paying companies are called. In 2022, Petrobras was the second largest dividend payer in the world.

The PT management defends that a greater part of the cash generation be destined to new investments in segments abandoned by previous administrations, such as renewable energies and petrochemicals.

“It doesn’t make sense for Petrobras to be treated like a parking lot, which is that business that has little investment to make”, defended Leite. “Oil and gas is a capital intensive business.”

Since he took over the company’s presidency, in January, Jean Paul Prates has advocated a dialogue with investors to discuss what types of projects can receive money that was previously earmarked for dividends.

The expectation is that a review of the strategic plan will still take place in the coming weeks, with some indication of a contribution to a renewable energy project and confirmation of contributions to refining units based on vegetable oils. A new strategic plan, however, will only be released at the end of the year.

While it does not present new investments, Petrobras must propose a share buyback program to shareholders, which allocates part of the dividend money to improve the price of the company’s shares on the stock exchange.

At breakfast with journalists, the director of Industrial Processes and Products at the state-owned company, William França, said that, among new future projects, the company is studying a petrochemical unit in the region of the former Comperj (Rio de Janeiro Petrochemical Complex).

The objective would be to dispose of the high volumes of ethane that will be produced at the local pre-salt gas processing unit, which is scheduled to open in 2024. Petrobras prefers to make the investment with partners, but has not ruled out acting solo.