Petrobras Reports 38% Drop in Q1 Profit Amid Renewable Energy Shift

Petrobras reports $4.63 billion net profit in Q1 2024, a 38% decline from the same period in 2023. The company plans to shift focus towards renewable energy, cutting dividend payouts to investors amidst political pressure.

Bijay Laxmi
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Petrobras Reports 38% Drop in Q1 Profit Amid Renewable Energy Shift

Petrobras Reports 38% Drop in Q1 Profit Amid Renewable Energy Shift

Petrobras, the Brazilian state-owned oil giant, has reported a net profit of $4.63 billion for the first quarter of 2024, a significant 38% decline compared to the same period in 2023. The company's revenue also saw a 15% decrease, with oil, gas, and fuel sales dropping by 4.6%. These figures fell short of analysts' expectations, signaling challenges for the oil major.

Why this matters: The shift towards renewable energy by a major oil company like Petrobras has significant implications for the global energy landscape and the transition to cleaner sources of energy. As the world moves towards reducing carbon emissions, Petrobras' strategic shift could have a ripple effect on the industry, influencing other companies to follow suit.

The company's board approved a dividend, payments of $2.61 billion, or 1.04 reais per share, which was lower than the $3.2 billion predicted by analysts. This decision comes amidst political pressure from the Brazilian government, which has criticized Petrobras' generous payouts to private investors in the past. As the company's largest shareholder, the government has influenced the allocation of 50% of available payouts to investors, aiming to address fiscal deficits and rising spending.

Petrobras CEO Jean Paul Prates has announced plans to shifts, focus towards wind, solar, and renewable fuels, sectors generally perceived as less profitable than traditional oil and gas production. This move has raised concerns among investors about potential impacts on future returns. Prates has signaled a more cautious approach to future payouts, citing increased spending on renewable energy projects.

The company's adjusted earnings before items stood at 60 billion reais, missing the average estimate of 69 billion reais by analysts. Net income also fell short of consensus, totaling 23.7 billion reais. Books, Drop, Profit were among the contributing factors to this underperformance.

Despite the challenges, Petrobras has made strides in its sustainability efforts. The company has started marketing R5 diesel with renewable content and established a partnership for the sale of CAP Pro W asphalt, expanding its offer of more sustainable products. Additionally, Petrobras has acquired Renewable Energy Certificates (I-RECs), ensuring that all the electricity acquired for its activities has been generated by renewable sources, achieving neutrality of scope 2 emissions in 2023.

As Petrobras navigates this transitional period, balancing its traditional oil and gas operations with a growing focus on renewable energy, the company faces the challenge of maintaining profitability while adapting to a changing energy landscape. The coming quarters will be critical in determining the success of Petrobras' strategic shift and its ability to deliver value to shareholders in the face of political pressures and market uncertainties.

Key Takeaways

  • Petrobras' Q1 2024 net profit drops 38% to $4.63 billion.
  • Revenue decreases 15%, with oil, gas, and fuel sales down 4.6%.
  • Petrobras shifts focus towards wind, solar, and renewable fuels.
  • Dividend payout reduced to $2.61 billion, citing increased renewable energy spending.
  • Petrobras makes strides in sustainability, achieving scope 2 emissions neutrality.