Petrobras Investors to Benefit From Debt Decrease

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Brazilian state oil producer Petrobras' successful debt reduction efforts will pay off for its shareholders in 2022 as the company looks to implement a supplementary dividend.

Rising oil prices and a series of divestments helped the company meet its ambitious debt reduction target earlier than planned. Petrobras reported on Thursday that its gross debt stood at $58.7 billion at the end of the fourth quarter of 2021, down from $75.5 billion in 2020 and $111 billion in 2018.

When its gross debt falls below $65 billion, Petrobras' dividend policy calls for it to distribute 60% of its free cash flow to shareholders.

To that end, the company on Thursday said it is proposing a supplementary dividend of 2.861 Brazilian reals per share at its next shareholders' meeting in April. If approved, it would raise payouts to 7.773 reals/share — or a total of about 101.4 billion reals (roughly $20 billion) — relative to its 2021 performance.

"We will comply with 60%, and then, [considering] cash inflows from divestments and market scenarios could distribute additional dividends, but probably closer to the end of the year,” said CFO Rodrigo Araujo Alves.

Petrobras executives also said that the company was probably done with its debt reduction drive, at least for now.

“We don’t expect [our debt] to continue to reduce substantially,” said Araujo. “The optimal level for gross debt is between $55 billion and $65 billion … It's reasonable to have some upside and downside room for specific events — for example having an FPSO [floating production, storage and offloading vessel] coming on line that temporarily increases our debt level, and not stopping the dividend policy because of that type of event.”

Petrobras reported net income of about 106.7 billion reals ($21.3 billion) for full-year 2021, more than double its previous all-time annual high from 2019. Nearly a third of that figure came in the fourth quarter.

NOCs, Corporate Strategy , Earnings
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