Petrobras: company can set its own price – 06/24/2023 – Market

About to complete five months in charge of Petrobras, Jean Paul Prates considers that he has been forwarding “without trauma” the agenda promised by the government of Luiz Inácio Lula da Silva (PT). One proof, he claims, is that the state’s shares rose on the day of the change in the fuel price policy.

“Contrary to what some thought, because the PPI [preço de paridade de importação] it is easier to calculate”, he says. “But it is not possible that it is not understood that the company can set its price according to the variables and restrictions it has”.

In an interview with SheetPrates says that the next challenge for his management is to approve a new dividend policy, which should transfer part of the resources currently directed to shareholders for investments in new segments, such as renewables and petrochemicals, but without giving up on investors.

And he defends a chance to test the existence of oil in the basin at the mouth of the Amazon, after Ibama (Brazilian Institute for the Environment and Renewable Natural Resources) refused a license. “The possibility of leakage is extremely remote”, he claims.

Prates says that one of his management missions is to reconcile the political interests of the controlling shareholder with the interests of the private shareholder. President Lula, he says, participates in strategic debates in the sector, but the company is not a “government department”.

Mr. is completing five months ahead of the company. What a swing Mr. does this period? We have already managed to forward most of President Lula’s government program without trauma, a legitimately elected program that did not contain exaggerations, it just put things back in their proper places. With regard to the PPI, for example, something I did not expect happened: on the day we announced our commercial strategy, the stock rose. Contrary to what some thought, because the PPI is easier to calculate. But it is not possible that it is not understood that the company can set its price according to the variables and restrictions it has. Companies do this in any market, with any product. And then I think we explained it calmly enough.

And also the issue of energy transition, the market really understood that the company started to guarantee a future. Before, it was a very short-term thing. They were preparing the company to sell. The first stage was to make it highly profitable, with the minimum structure, leaving only the heart of the company, which is to produce pre-salt and four or five refineries in the Southeast.

A short-shot company, a company that certainly wouldn’t last another 70 years, because it was going to find the energy transition ahead, it wasn’t going to have new reserves because it was no longer doing significant exploration. Let’s go back to being a national company, let’s expand our scope of action a little more. We will seek viability in new areas to prepare for the future. Without committing any folly, without exaggeration. But let’s look at wind, let’s look at solar, let’s look at hydrogen, let’s talk to our counterparts.

Do you think this feeling is being reflected in the appreciation of shares? I think people are realizing that it is responsible management, that we manage to reconcile the policy, the relationship with the controlling shareholder with market expectations. The great challenge of this management is to show that it is possible to manage a mixed state-owned company.

And when it is not possible to do this, managing to explain to the other side why. Both explaining to the shareholder that Petrobras has a role in structuring Brazilian development, and explaining to the government that everything cannot be done as if it were a government department, that it has to meet some expectations of the other shareholders in order not to break this bond of trust .

Will the new dividend policy follow this line? Is there already a formula? It’s a negotiation with the shareholder: ‘leave one more real with me, it will yield better than keeping it with you’. It’s not from a percentage [específico de dividendos], but the need for investment. I have some reservations about this issue of always having a rule. The company has to have some flexibility.

We are not going to leave anyone without dividends, unassisted. But there is a huge difference between what is required by law and the current model, a point in the middle that makes everyone comfortable. [A mudança] it will not be in the first year or in the first month, so we confirmed the same level of dividends [no primeiro trimestre]. Maybe in the next one we’ll make a slight change, then a little more, it has to be a parsimonious thing, that doesn’t generate too much trauma.

But you must anticipate this dividend reduction with a share buyback program, right? Share repurchase will be discussed. While there are no projects to exchange [pelos dividendos], is a way to handle it. The CFO is working on a proposal. I’m not confirming that it will happen soon, but we have that intention. It may not be a complete proposal, it may be the first step, or the second step. We don’t need to do everything at once.

And will the business plan be reviewed before the end of the year? An adjustment to the previous plan should come out now in July or August, incorporating the new guidelines that we released, with a little petrochemicals, fertilizers, stronger investment in energy transition. There’s no surprise, everything we’ve already talked about is what’s going to come out. Some renewable project probably [vai entrar]we are seeing interesting things.

The previous plan foresaw a significant amount for the exploration of the equatorial margin and now you have had this setback at the mouth of the Amazon… [Interrompe] I still don’t consider it a setback, no. [A negativa da licença] it is disappointing, but it is part of the oil activity. Before [no governo Bolsonaro], there were understandings between government agencies and Petrobras that were not always efficient. It is the case of Ibama, for example, having demanded that the rig end up there [na locação].

The current Ibama understands that that was to create a kind of fait accompli. [A empresa] it said like this: “we have the probe mobilized, it’s costing I don’t know how many millions”. It’s typical bravado, right? The guy rents land on top of a dune, then decides to do something he can’t do and then keeps saying that the environmental agency won’t let him, that it’s getting in the way.

We don’t want to get into this kind of debate, we want the technical debate: what do you want us to do there? There is no oil operator more qualified and more careful with the environment and the Amazon rainforest than Petrobras. There is no better operator to test the hypothesis of having oil there.

So you don’t consider an end of the line? No. We present an appeal, which contains new arguments, new commitments and we have already made new structures available based on Ibama’s new requirements. If, at the limit, the Brazilian state understands that this is a prohibited area for oil drilling, we will respectfully leave there and explore in other areas of the equatorial margin.

That area was granted by the Union and there is an obligation to comply with a work program that includes this well. If not, we are subject to a fine. Now, if you wait for the AAAS [avaliação ambiental de área sedimentar]I think that really makes this concession contract unfeasible.

[O Ibama] could perfectly grant the right for us to drill, to take a rock core to show that it has oil. It doesn’t produce oil, it doesn’t drain oil, so the possibility of a leak is extremely remote. Petrobras is a diligent operator to do this: prove or not the existence of oil, take the rig out of there and wait for this AAAS to develop production. It’s the middle ground.

How does Petrobras intend to reverse the agreement with Cade (Administrative Council for Economic Defense) that determines the sale of refineries? It was completely inappropriate to force Petrobras to sell refineries, when in fact it was not accused of anything. Petrobras voluntarily, without Cade ever asking for anything, went there and delivered the refineries.

The market has been free since the 1997 law, today Petrobras competes with all the refineries in the world, even more so in a regime that had the PPI, which was an import parity price. I mean, the price of this market that Petrobras was being accused of dominating was the importer’s price.

How can I be dominant if I guarantee the importer, who is my worst competitor from an efficiency point of view, his price and not mine? So, in fact, Cade served as a pretext and they know it. Today, with the dust settled and with a lot of rationality and, above all, a lot of respect for Cade’s authority, we have to re-discuss this whole process.

Do we really have a monopoly on these regions? It is not. When you sold the refinery, did the consumer price improve? It didn’t get better. Has it become a regional monopoly? It turned a certain way. Many bought a terminal with a refinery, with everything. So some places are even enclosed in the PPI.

We have more competitiveness, we can offer a cheaper price for the Brazilian economy. It’s not for the people, it’s not for voters alone. It’s for the Brazilian economy. It’s for the agro that loads the soybeans on the train. It is for the economy in general, for commerce, for the common consumer too, but less and less because he will use public transport, Uber…

We can win by being self-sufficient in oil, having this as a competitive advantage in relation to countries that are not. PPI was a mirage sold as an essential thing, when in fact it was essential for importers, for those who complement Brazil’s supply. It was the tail wagging the dog.

We got back to normal. The dog that wags its tail. What’s missing I buy out. For the price the guy can sell. But what I manage to produce here I sell for the price that the domestic market can afford. I have to have a more competitive price, not because I am dominant, but because Petrobras is the most efficient, it knows the country best, it has the most efficient refineries.

The president of BNDES [Banco Nacional de Desenvolvimento Econômico e Social], Aloísio Mercadante, said that you are waiting for Lula’s decision on the purchase of Braskem. Are you going to buy? Anything can happen, including nothing. But there is no such thing [de decisão do Lula]. We are going to evaluate this and it is clear that President Lula is part of the analysis group as well. He usually agrees that petrochemicals is one of the ways the oil industry gets better, going for something less basic than burning diesel and gasoline.

But that doesn’t mean he says “go there and finish off Braskem or leave Braskem”. It’s more in the sense of listening to understand what’s going on. President Lula today is very judicious, conscientious. He no longer has that voluntarist thing of politicians in general, of “go there and do it, because Brazil needs it and such”. Conversations with him are very technical. ‘Is it really worth it? Are you sure what you are doing? What are we going to gain from this? What are the consequences for one side and the other?’

He’s a judicious controlling shareholder, right? It will also help us make a decision, but the decision will be made based on technical, economic and strategic criteria for Petrobras.