Petrobras loses $14 billion in market value after dividend hopes shrink

SAO PAULO (Reuters) – A thin dividend from Brazilian state-run oil company Petrobras sent its shares plunging on Friday, wiping more than 70 billion Brazilian reais ($14 billion) from its market value as analysts questioned how the company was spending its reserves. Increased cash. .

The more than 10% drop in shares reflects investors' biggest frustration yet with Chief Executive Jean-Paul Prats, who has tried to balance the interests of minority shareholders with a left-wing government keen to see more capital spending.

Petrobras has been a major cash cow for its shareholders in recent years, including the Brazilian government, with previous management paying far more than its major Western oil counterparts.

Under the new management chosen by President Luiz Inacio Lula da Silva, the company reduced its payouts, but the extraordinary dividend was still widely expected in the market.

Goldman Sachs analysts told clients that investors expressed expectations for a $3 billion to $4 billion extraordinary dividend in addition to previously scheduled year-end payments.

In its fourth-quarter earnings statement late Thursday, Petrobras said it would only pay a routine dividend of 14.2 billion reais ($2.9 billion) to shareholders.

“The message being passed is very clear: investors should expect only the bare minimum of Petrobras' dividends,” analysts at JPMorgan wrote, saying the fourth-quarter dividend represents a meager 8.1% dividend yield in 2024, “well below peers who… Typically yields in the low teens.”

The lack of additional earnings also led to a series of downgrades from analysts, including Bank of America, Bradesco BBI and Santander.

Preferred shares in Petrobras fell more than 10% to 36.16 reais in morning trading on Friday in Sao Paulo, sending the benchmark Bovespa share index down 1.4%.

The decision “increases the risk perception at Petrobras, particularly with respect to government influence regarding key capital allocation decisions,” Bank of America analysts wrote in a note to clients while downgrading the stock to neutral.

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They said that eliminating the additional dividend means Petrobras “can focus on a more growth-focused agenda in renewables (resulting in higher capex with lower returns) and increases the likelihood that the company will be able to pursue mergers and acquisitions.”

Analysts at Bradesco BBI also downgraded the company, saying they believe “flows could move away from Petrobras to Chinese oil companies given the recent shift in capital discipline and aggressive buyback programmes,” they said of Saudi Aramco.

BTG Pactual analysts took a more balanced tone, noting that Petrobras had allocated 43.9 billion riyals in a dedicated “capital bonus” fund.

“Therefore, its use for other purposes will require amendments to the internal regulations,” they added.

Petrobras reported a 6.3% decline in its fourth-quarter net recurring profit to 41 billion reais, beating expectations of 35.3 billion reais among analysts polled by LSEG.

($1 = 4.9769 riyals)

(Reporting by Peter Frontini; Editing by Gabriel Araujo, Brad Haynes and Jonathan Oatis)