Brazilian oil giant Petrobras will take a crucial first step on its road back to financial health this week when it will finally publish its overdue results for 2014.
The numbers, which are due after a board meeting on Wednesday, will be the first attempt to cost the damage done to Brazil’s biggest company by political corruption.
The figures have been pending since last year after independent auditors PricewaterhouseCoopers (PwC) refused to sign off on third-quarter results because of the fallout from a corruption scandal.
Failure by Petrobras to publish full-year numbers by the end of next month would leave it in technical default, further damaging its battered credibility with investors. For more than a year, federal police and prosecutors in Brazil have been building a case against dozens of politicians, businessmen and black-market financiers, accusing them of illegally siphoning billions out of the company.
The state-controlled firm’s previous management team estimated that an asset writedown to account for corruption and mismanagement could total as much as €27 billion, based on an analysis by consultants Deloitte.
Enrage voters
The huge figure caused consternation in Brazil’s government, which feared it would further enrage voters who have taken to the streets to protest corruption at a company that for decades was a symbol of Brazilian national pride.
After floating the huge writedown Petrobras president Maria Graça Foster was forced out and replaced by Aldemir Bendine, an ally of Brazil's president Dilma Rousseff, who has signalled that the eventual figure will be significantly lower. However, as a result, the company is not expected to pay any dividend for last year.
The results are also expected to distinguish between losses caused by corruption, and asset writedowns due to the recent collapse in the oil price.
But, to avoid a technical default, the methodology employed this week will need the auditor’s approval as well as that of market regulators in Brazil and the US, where Petrobras shares are traded.
Both the company and its auditor are now the targets of class-action law suits in the US by investors who say they were misled about the financial health of the company and its anti-corruption safeguards, resulting in huge losses.
Already the world’s most indebted listed company and with the biggest corporate spending plan in the world to fund, Petrobras is desperate to restore itself to financial health.
Credit rating
The corruption scandal has already caused its credit rating to be cut to junk status in February, complicating access to financing. But on Friday the company says it has raised the necessary cash for its operations this year, largely thanks to loans from Brazilian state banks.
It also raised €2.77 billion by selling and leasing back oil platforms from bank Standard Chartered to add to $3.5 billion(€3.25 billion) in financing it received from China Development Bank.
With Petrobras facing a cash squeeze and barred by law from paying contractors under criminal investigation, Brazil’s oil services sector is caught in the grip of a liquidity crisis that has already led several companies to seek bankruptcy protection with thousands of workers having already been laid off.
In a bid to raise €12.75 billion, Petrobras is currently undertaking an asset fire-sale. Believed to be on the block are its Brazilian fuel distribution business and a stake in petro-chemical firm Braskem.
The company has denied reports it is planning to sell any of the giant offshore oil fields it discovered in the last decade.
The recent purchase by Shell of BG Group, which is Petrobras’ junior partner in several of these fields, has emphasised the continuing attraction Brazil’s offshore still holds for investors, despite the drop in the oil price raising questions about the financial viability of some of the finds.
