Petrobras Payout Rewards Investors Who Ignored Lula Risk

(Bloomberg) — Petroleo Brasileiro SA posted a record full-year dividend in 2022, rewarding investors who stuck with Brazil’s state-controlled oil producer despite concerns about political intervention under President Luiz Inacio Lula da Silva.

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The company’s board has approved 35.8 billion reais ($6.9 billion) in dividends from the fourth quarter, the Rio de Janeiro-based producer said in a filing. It also suggested setting aside 6.5 billion reais of the dividends in a reserve, which would need shareholder approval and reduce the dividend payout to 29.3 billion reais.

Petrobras is the second-biggest payer of dividends in the oil industry behind Saudi Aramco, according to data compiled by Bloomberg. The robust dividends have helped compensate investors for share underperformance over the past year.

Oil majors around the world are flush with cash after oil prices soared last year, putting them under scrutiny for windfall profits at a time consumers are suffering from inflation. Petrobras was hit with a four-month oil export tax this week.

While the dividends come as a relief to investors who have hung onto the stock, they are expected to decline going forward. Jean Paul Prates, who President Luiz Inacio Lula da Silva chose as Petrobras’s chief executive officer, has criticized previous management for paying record dividends while neglecting to invest in renewable energy and refinery expansions.

The dividends are the result of a major turnaround at Petrobras over the past six years. It has slashed what was once the biggest debt of any oil company, boosted production and curbed expenditures, leaving Prates with what analysts consider a well-managed company with a strong balance sheet.

Analysts and investors are concerned that, under Prates, Petrobras will start subsidizing fuel to help the government control inflation, and invest in lower-return businesses such as refining. Its asset sales have been put on hold for 90 days, and it has been pressured to constrain fuel prices.

Petrobras’s fourth-quarter net income of 43.3 billion reais was up from the year-ago period, and the previous quarter on easing oil prices.

(Updates to include details on earnings throughout)