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HenryTo
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 Posted: Fri Jan 20, 2012 5:01 pm Post subject: |
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Morningstar's update on PBR.
| Quote: | | As we expected, Petrobras' PBR full-year domestic oil production fell short of management's guidance of 2,100 thousand barrels per day (plus or minus 2.5%), finishing the year at 2,022 mb/d, resulting in growth of 0.9% from 2010. The cause of the shortfall was primarily excessive planned and unplanned downtime for maintenance on fields in the Campos Basin and not related to the prolific presalt fields in the Santos Basin. However, we think the guidance miss in the early stages of a decade-long plan raises concerns about Petrobras' ability to achieve production targets. That being said, we hesitate to draw too many conclusions from one year. We think the truer test of Petrobras' ability to execute will come in 2012, when it looks to bring on line 400 mb/d of produc tion capacity. Inability to achieve 2012 targets would elevate the level of execution risk for the company's aggressive production targets through 2020, in our opinion. Through the first nine months of this year, downtime had reduced annual production by 44 mb/d. While October production was similarly affected by unplanned downtime, production growth accelerated in November and December with the return of volumes affected by maintenance and the startup of new platforms in the Jubarte and Marlim Sul fields. Despite these additions though, Petrobras failed to reach its expected daily production of 2,100 mb/d in December, instead averaging 2,084 mb/d during the month. It is also unlikely Petrobras exited the year producing 2,200 mb/d as it previously expected, though we will have to wait for the earnings release and conference call for confirmation. Full-year total production averaged 2,621 mb/d, a 1.5% increase from 2010. |
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HenryTo
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| Posted: Mon Nov 14, 2011 12:32 pm Post subject: |
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Morningstar on PBR's 3Q earnings
| Quote: | | Petrobras' PBR net income for the third quarter sank 26% to BRL 6.3 billion from BRL 8.6 billion a year earlier as downstream losses and net financial expenses more than offset increased exploration and production income. As with the second quarter of this year, higher oil prices continued to produce mixed results for Petrobras. The near 50% surge in international oil prices during the period resulted in E&P income rising to BRL 10.3 billion from BRL 6.9 billion a year earlier. However, the higher oil prices hurt the refining business, which produced a loss of BRL 3.2 billion during the quarter compared with income of BRL 1.3 billion a year earlier. This follows a loss of BRL 2.3 billion in the second quarter of this year. As a result, third-quarter EBITDA increased only 13% to BRL 16.7 billion from BRL 14.7 billion a year earlier despite the rise in oil prices. Petrobras recently announced a modest increase in diesel (2%) and gasoline (10%) prices, which should help to stem losses going forward, but with international oil prices above $100 a barrel, we think the refining segment could continue to report losses. As a result, the benefit of Petrobras' oil-dominant production portfolio will continue to be somewhat negated by its downstream exposure. While noncash, Petrobras recorded a net financial expense of BRL 5.3 billion due to the effect of the real's depreciation on U.S. dollar-denominated debt. This stands in sharp contrast to the second quarter, when Petrobras posted a BRL 2.9 billion gain that greatly benefited earnings. Domestic production for the quarter rose slightly to 2,334 thousand barrels of oil equivalent per day from 2,324 mboe/d last year. Year to date, Petrobras has produced 2,363 mboe/d compared with 2,322 mboe/d last year. Oil production is only up marginally year to date at 2,013 mb/d from 1,995 mb/d last year as natural field decline and maintenance limited growth. Oil production in the third quarter was particularly weak, falling to 1,978 mb/d from 1,991 mb/d a year earlier and 2,018 mb/d in the second quarter as planned and unplanned maintenance took a toll on volumes. As a result of its year-to-date performance, we do not expect Petrobras to achieve full-year guidance of 2,100 mb/d (plus or minus 2.5%). Its stated goal of peak production of 2,250 mb/d by year-end may not be achievable either. Petrobras did raise presalt production to 135,000 boe/d in September, which is encouraging. However, given the overall production declines during the quarter and the likely guidance miss, we wonder about execution in the other parts of the portfolio. T he next few quarters for Petrobras could be critical as it looks to put recent maintenance issues behind it and start delivering on its previous growth projections. Otherwise, concerns about execution risk are likely to grow. |
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rffrydr
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Location: Sunny California
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| Posted: Thu Sep 01, 2011 9:46 am Post subject: |
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| Quote: | Central bankers around the world must be looking at Brazil with mixed emotions. The Central Bank of Brazil’s policy interest rate cut – from 12.5 to 12 per cent – inspires admiration, fear and jealousy.
The admiration is for continuing boldness. The central bank is bravely responding to the sudden deterioration in the global economic environment. If the global summer soft patch ends soon, or if Brazilian inflation starts to rise again, the bank will look foolish. But the slowdown bet looks good, if Thursday’s releases of surveys of manufacturing sentiment are any indicator: at recessionary levels in the UK and the lowest in two years in the eurozone.
The Brazilians are also admirable in their continuing battle against the country’s now fading tradition of high inflation. Even after the cut, the overnight rate is still around 5 percentage points higher than the inflation rate. That real rate is roughly zero in India, China, Russia and Japan and negative in the US, eurozone and UK.
But the Brazilian cut sets two frightening precedents. First: political weakness. The crisis has made central bankers much more political, but in most countries they have the upper hand over politicians and regulators. In Brazil, it looks like the bank has yielded to pressure from the government to ease up. Second: policy impotence. The Brazilian central bank has proved no better than its peers at keeping inflation down and growth balanced and high. The rate cut is in part an admission that high rates have pushed up the currency and hurt exporters.
At least the Brazilians have room to manoeuvre. In almost every other country, additional monetary stimulus would be likely to do nothing more than blow dangerous financial bubbles. Central bankers can be excused for feeling jealous of the Brazilians’ freedom.
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E-mail the Lex team in confidence at lex@ft.com
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rffrydr
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| Posted: Fri Aug 19, 2011 7:08 pm Post subject: |
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They did litterally "fall out of bed"...but aug 9 lows still below.
http://stockcharts.com/h-sc/ui?s=EWZ&p=D&b=5&g=0&id=p11505607200
Hard to believe this stuff won't go on for years on momentum alone:
http://www.economist.com/node/18712379
(Interesting that they see this boom as "Japan II)
| Quote: | | Odebrecht, the Brazilian firm building the railway, recently flew your correspondent to Salgueiro, where its two coast-bound branches meet. The line’s 3m concrete sleepers are being cast there, and the ballast on which they will lie is quarried nearby. Paulo Falcão, the project director, is preoccupied with a novel problem for the north-east: a labour shortage. Even though word of the grand projects dotted around the north-east is attracting workers from all over the country, the demand is such that Odebrecht is training everyone from carpenters and bricklayers to truck drivers and forklift operators itself. Some have no previous construction experience. A fifth of the employees at Salgueiro are women. |
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HenryTo
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HenryTo
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| Posted: Tue Aug 16, 2011 10:46 am Post subject: |
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Morningstar on Petrobras' 2Q earnings:
| Quote: | | Petrobras PBR reported second-quarter net income of BRL 10,942 million compared with BRL 8,295 million for the same period last year thanks to higher oil prices and improved financial results. Reflecting the benefit of higher oil prices, which offset higher costs, exploration and production earnings rose 38% to BRL 10,953 million. Domestic production volumes were only slightly higher for the quarter, rising a little more than 1% from the year before, but were 2% higher through the first half of the year compared with 2010. However, higher oil prices also resulted in the refining and marketing segment posting its second consecutive quarterly loss, highlighting one of our preliminary concerns about Petrobras' downstream investment plans. Refining and marketing posted a loss of BRL 2,280 million compared with losses of BRL 108 million in the second quarter last year and BRL 95 million in the first quarter of this year. We would expect that as long as oil prices continue to move higher, Petrobras' downstream segment will suffer. However, the company may have found some relief, if only temporarily, from the recent fall in oil prices. Also, financial results of BRL 2,895 million thanks to foreign exchange gains on dollar-dominated debt greatly benefited earnings. On a positive note, the company reported the Lula pilot project averaged more than 36 thousand barrels of oil equivalent per day in May, Petrobras' highest ever production from a single well. We believe this demonstrates the potential of Petrobras' presalt resources, and we look forward to additional disclosures from Petrobras along the lines of some of its partners in the area. |
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rffrydr
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| Posted: Wed Jul 27, 2011 8:42 am Post subject: |
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Santander surprises with provisions against Brazil 
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HenryTo
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rffrydr
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| Posted: Thu Jun 16, 2011 2:53 pm Post subject: |
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The leadership is here--and he speaks chinese:
http://www.chinadaily.com.cn/bizchina/2011-05/17/content_12525198.htm
China will continue to suffer trade deficits because it what Brazil has it cannot do without: ore, soy, oil. That this bilateralism has reached the point of nation-building and proposes bypassing the dollar in its trade should come as no surprise to these two countries possessing 40% of the world's population.
Brazil is blooming and the bloom will have to be off the china rose before investors get tired way down south. Glencore pushes against, or for, this direction?
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HenryTo
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| Posted: Thu Jun 16, 2011 11:38 am Post subject: |
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Stratfor's "contrarian" views on Brazil:
| Quote: | Portfolio: Constraints on Brazil's Prosperity
There has been a lot of talk of late of how Brazil is a golden investment opportunity. There are certainly a number of trends that STRATFOR sees that are very positive but what most people don’t realize is Brazil has a lot of deeply ingrained geographic problems hindering its development. The primary problem is that the core geography is a series of coastal enclaves on the southeastern coast on the Atlantic, very close to the Argentine border. They are all separated from each other, there is something called the Grand Escarpment that pours off the Brazilian Highlands and the cities are in little pieces of land at the bottom of that escarpment. It is very difficult for them to get economies of scale. The result is a very different settlement pattern than you saw in some of the more traditional states like Argentina and the United States or in northern Europe. You can’t just go up the escarpment and set off on your own. You are hitting rainforest and you are hitting areas that don’t have navigable rivers. So you can’t set up shop and export to the wider world in a short period of time. Instead, Brazil has a much higher capital cost for any sort of development. So you can’t have small free holders. Instead you have corporations or rich families who go in and set up their own personal company towns, plantation farms, that sort of thing. Now these oligarchic interests consider whatever they’ve invested into an area to be their God-given right. It is their money, it is their land, it is their power and they see no reason to share — not even with each other. So what infrastructure the Brazilians do have, is typically isolated in specific pockets. It is not well integrated together.
Additionally, the climate there is not good for most types of crops, really only coffee and sugar do very well in Brazil. These are large plantation crops that require a lot of low skilled labor; it’s is not easily mechanizable. So you have a system that has insufficient disaggregation infrastructure and yet has a very small skilled labor pool. Whenever the Brazilians can manage to get some money into the system, whenever they can get a little bit of credit, they immediately run into labor and transport bottlenecks and inflation goes through the roof. Historically, Brazil has been one of the world’s highest inflationary but lowest growth economies. In the 1980s, the situation got so bad that inflation was in 2000 percent a year. In fact, if you take that period and bookend it, accumulative inflation was 1 quadrillion percent, which is the highest inflation in any major economy since Weimer Germany. The government’s solution was to absolutely destroy growth in order to get inflation under control. The banks were heavily regulated, foreigners weren’t allowed to pump too much credit into the system, the government drastically slashed its budget in order to keep consumption down and even got rid of a lot of the subsidies that kept the population quiet — all in order get inflation back under control. This “real plan,” as it was called, was a great success; one of the greatest successes in macroeconomic reform in recent decades. So even on those rare occasions when Brazil has been able to achieve four, five, or maybe even 6 percent economic growth, inflation picks up: typically strangling that growth even as it is just starting to get going.
In recent years the Brazilian success in reining in inflation has led to a series of policies that are greatly respected by the investment community. Low government debt, low subsidies, healthy banks, these are all things that investors are always looking for. And so investors have been pouring lots of capital into Brazil. This puts Brazil into a bit of a bind. All that incoming money is driving the Brazilian real up. It has risen by about 50 percent in the last two years. That strong of a currency is absolutely gutting the industrial base in Brazil because now they can’t compete. Remember, this is a low industrial base, a low skilled economy: they can’t compete at the top of the value-added chain; they have to compete on price. With a 50 percent increase in the currency value, their exports simply aren’t doing well. In fact, they have signed a number of trade agreements with the Chinese allowing the Chinese companies to export directly into the Brazilian market where they are in the process of hollowing out the entire Brazilian industrial base.
Addressing this challenge is difficult. It requires a series of changes in educational policy, immigration policy, industrial policy and ultimately a different trade deal that will allow the Brazilians to expose themselves to competition in a safe way. These would be difficult things for any state but what most people have forgotten is that Brazil is very new to the international community. It was only in the early ’80s that civilian rule was reinstated; it was only 1988 when the Constitution was adopted; it was only in 1994 that their currency came into being. Brazil needs strong leadership that is willing to break from a lot of the traditions the Brazilians establish the last 30 years and they need it now. |
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rffrydr
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| Posted: Mon May 16, 2011 7:05 pm Post subject: |
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| Code: | | The poor results come as little surprise, as Petrobras' downstream segment often suffers in times of rising oil prices because it's unable to pass along costs to consumers in a timely manner. This is also part of the reason we have questioned the wisdom of additional investment in refining capacity by the company. |
We could use a few more oil majors with such built-in stabilizers.
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HenryTo
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| Posted: Mon May 16, 2011 12:50 pm Post subject: |
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Morningstar on PPR's 1Q earnings:
| Quote: | | Petrobras PBR reported first-quarter net income of BRL 10,985 million compared with BRL 7,726 million for the same period last year, thanks largely to improved exploration and production earnings, which offset losses for the refining and marketing segment. Petrobras also benefited from BRL 2.7 billion in pretax exchange gains on U.S. dollar-denominated debt and higher returns on financial investments and bonds. E&P net income increased 28% from the year before to BRL 9.3 billion, thanks primarily to higher oil prices and slightly higher production volumes. Total domestic production increased 4% from the year before to 2,385 thousand barrels of oil equivalent per day, with oil and natural gas volumes higher by 3% and 8%, respectively. International net income increased 89% to BRL 843 million, thanks to higher oil prices, which helped to offset the 1% decline in production volumes to 242 mboe/d. Dragging on results was the refining and marketing segment which posted a loss of BRL 95 million compared with a gain of BRL 1,116 million a year before. The poor results come as little surprise, as Petrobras' downstream segment often suffers in times of rising oil prices because it's unable to pass along costs to consumers in a timely manner. This is also part of the reason we have questioned the wisdom of additional investment in refining capacity by the company. With little new information in the earnings release, our attention turns to the release of Petrobras' new five-year investment plan, which we anticipate could occur this week. The company already shed some new light on the plan by announcing a f ew weeks ago that investment in the Santos presalt basin would be less than previously planned because of higher well productivity and better understanding of production potential. Also, we look forward to an update on production targets in light of the transfer of 5 billion barrels of production from the government last year as well as plans to secure the necessary resources for development. |
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rffrydr
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| Posted: Fri Apr 15, 2011 2:31 pm Post subject: |
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Those EEM ways clouding up the picture:
http://www.smartmoney.com/investing/stocks/brazils-ouster-of-vale-ceo-signals-warning-1302883730654/
Lula had much to prove--and therefore much to restrain. Now that dutch-disease has gripped the country, probably even a benevolent dictator would make this push. Add to the fact that most every emerging economy see steel production as a hurdle into japan-style success. And it's obvious: look at what the Saudis are doing with next-to-nothing margins refining. If you got lemons make lemonade. It's win-win. 
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rffrydr
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| Posted: Wed Apr 13, 2011 6:53 am Post subject: |
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The chinese cure to dutch disease--or the ulitmate import?
http://www.cnbc.com/id/42561765
This isn't about the rising wages in china: it's about the huge margins on popular electronics in S. America (I've brought some Apple stuff to sell when I go down there), part legacy of the old inflationary days. And the trade imbalance pressures are sure to be supported by both governments--who have to protect the soy/ore triangle.
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rffrydr
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