(Bloomberg) – Brazil’s state-controlled oil producer Petrobras approved dividends slightly below expectations amid a trade war that has created economic uncertainty and undermined oil prices.
Petrobras will pay $2.1 billion USD (11.72 billion reais) in first-quarter dividends, it said in a filing Monday. Expectations were for a $2.2 billion payout, according to an average of six analyst forecasts reviewed by Bloomberg.
Brazil’s oil giant has been showering shareholders with robust dividends even though the policy has come under political attack and contributed to the downfall of the company’s previous chief executive officer last year. Investors have been concerned that rising capital expenditures, which surpassed guidance in 2024, could continue and limit future payouts. Shares fell as much as 0.95% in Sao Paulo on Tuesday.
“First quarter results were not great, but not terrible,” BTG Pactual analysts led by Luiz Carvalho wrote in a note to clients. “Dividend guidance remains within policy limits, but any step-up in investment ambition could challenge payout visibility.”
Petrobras is sticking with its plans to expand oil production, along with other international oil majors including Exxon Mobil Corp., Chevron Corp. and Shell Plc, despite a decline in crude prices during April and a decision by OPEC+ to crank up output in June. Unlike U.S. shale operators who need more than $60 a barrel to cover costs, Petrobras’s breakeven price is $28 a barrel.
The Rio de Janeiro-based producer reported adjusted earnings before items of 61.1 billion reais, slightly below the 62.2 billion-real Bloomberg consensus estimate. Net income was above expectations at 35.2 billion reais, 48.6% up from the year ago period, thanks to higher oil production and a more favorable exchange rate, the company said.
The $4.1 billion in investments was 29% below the previous quarter when it had “atypical” spending related to the giant Buzios offshore field, and the decline may bring relief to the market. Still, the company maintained its spending plan and is pursuing a similar strategy to other oil majors including Exxon Mobil and Chevron, who are sticking with investment plans despite lower oil prices.
“We continue committed to executing our business plan,” Chief Financial Officer Fernando Melgarejo said in the earnings release, adding that the company is focusing on deepwater oil fields including Buzios and Atapu. “These are projects that generate value for our shareholders.”
Crude recently tumbled below $60 a barrel on fears that the trade war could weigh on energy demand, and after OPEC+ members decided to add production to a market that appears to be over-supplied. Measured optimism on trade talks between the US and China has helped prices recover some ground. Petrobras is taking into account the reality of “new oil prices” when drafting its next business plan, it said in an earnings presentation.
Analysts are optimistic that Petrobras’ production will accelerate as it reaches capacity at recently installed offshore production vessels and adds more. Two units are expected to reach capacity in the second quarter and a third is expected to begin operations.
Petrobras is seeking to replenish oil and gas reserves to avoid a production decline that is expected to start around 2030. The company said last week that it discovered “excellent quality” oil at the Aram block in the deep-water Santos Basin. It also resumed onshore exploration in Brazil’s Bahia state after a six-year halt, with plans to drill 100 wells over the next five years.
The state-run oil producer hopes to obtain a permit to start drilling at a block in deep waters off the coast of the Amazon forest soon, and bring an end to a years-long dispute with environmental authorities. Chief Executive Officer Magda Chambriard used President Donald Trump‘s slogan “drill baby drill” to advocate for the exploration during a conference in Houston last week. Petrobras has asked Brazil’s environmental authority to respond to a request to move an offshore drilling rig to the environmentally sensitive area by May 15.
