How was Silva and Luna’s first 100 days at the head of Petrobras

The management of retired general Joaquim Silva e Luna in front of Petrobras completed 100 days on Tuesday (27). He was appointed to this post in February by President Jair Bolsonaro, dissatisfied with the fuel price policy pursued by the previous presidency, under the command of economist Roberto Castello Branco, appointed by Economy Minister Paulo Guedes .

The arrival of the general in command of the oil company marked a significant change in the composition of the board of the oil company and of a large part of the board of directors of the state. The transition, at first, took the market by surprise and generated fears among stakeholders about a possible interference by Planalto in pricing policy. Interlocutors also speculated on how the divestment and investment program would be carried out under the command of the new chairman of the state-owned company.

But already in office, Silva e Luna said he would seek to reduce price volatility, without disrespecting alignment with international fuel prices. He indicated the intention to reconcile the interests of consumers and shareholders, valuing workers. He further said his administration would focus on debt reduction and investing in research and development.

“We will seek to reduce volatility [mudanças bruscas dos preços nas refinarias, em curtos prazos], without breaching international parity [alinhamento com os preços externos]”said the general at the time, citing the main cause of the rise in prices at the gas pump.

Now, in a 100-day management review, analysts believe the exchange was unsatisfactory from a price parity point of view, as President Jair Bolsonaro suggested at the time of Silva’s appointment. e Luna.

Bolsonaro still finds himself in the dilemma of trying to appeal to investors, a nod to the liberal agenda, and to the population, especially autonomous truck drivers, an important electoral base of pocketnarismo.

In July, gasoline and diesel hit their highest price at gas stations since the start of the year, and truck drivers are already threatening to start another strike. The category criticizes the federal government for not proposing measures to reduce the price of diesel, and Petrobras, for maintaining the price policy. Gasoline, for example, has already increased by 27.8% and diesel, by 27.3%, in 2021.

Many analysts are awaiting the launch of the oil company’s new strategic plan, usually carried out in early November, when they believe it will be possible to get a clearer idea of ​​the estimated production curve, demand and resources that will be invested in the pre-salt under the leadership of Silva and Luna. The last five-year plan drawn up by the management of Castello Branco, for example, placed significant weight on the exploration and production sector, in particular pre-salt.

International price parity and management predictability

For analysts, Silva and Luna’s policy, relative to that of Castello Branco, while trying to mitigate price volatility, continues to follow the parameters of the international oil market, putting pressure on fuel prices. at the pump. In practice, there has only been a widening of the spacing of disclosures of gasoline and diesel price readjustments in the country.

“There is no doubt that the level of dynamism in updating the management of Castello Branco was much more important. There have been much more intense movements, ”said Ilan Arbetman, research analyst at Ativa Investimentos. “And, in fact, the parity issue has not changed. Petrobras continues to aim to be on par with the international price.” The Ativa Investimentos survey reveals a 16% shift in current prices, meaning that fuels tend to get even more expensive.

What has changed, from the expert’s point of view, are the triggers. Rather, it is if the readjustments were made more quickly; today, more spaced. But it is difficult for the price adjustment dynamic to cease to be volatile.

“Especially OPEC [Organização dos Países Exportadores de Petróleo] it is very centralizing, it functions like a cartel, which seeks the best for its members. And there is a country over there, for example, where 60% of its GDP depends on oil. It is very difficult to classify any change as fleeting or substantial, cyclical or structural. In other words, we prefer to accept that the evolution of the price of Petrobras derivatives takes place more slowly, ”explains the Ativa specialist.

This is also the opinion, for example, of the National Federation of Trade in Fuels and Lubricants (Fecombustíveis), which asserts that even in the midst of the change of management, “hardly anything has changed” compared to the previous behavior.

Petrobras itself would have signaled to the interlocutors that it had to maintain the price policy, in line with the import parity price (PPI), but trying to avoid passing the volatility on to domestic prices. Brazil is not part of OPEC, but it is influenced by the supply control policy practiced by the organization.

Divestments and investments

Still for many analysts, the management of Silva e Luna has been aligned with the continuity of the divestment plan and the sale of non-core (non-core) assets. Thus, for them, there was no break in the objective of having the public company with a lighter and more profitable structure.

“When there was the exchange, there was concern that it would be interrupted in one way or another,” admits Arbetman, Ativa Investimentos, of investor expectations.

Petrobras has maintained a robust program, both with the de-alienation of the Papa-Terra field, for example, and with the shallow water, which has the highest extraction cost, often above US $ 10 per barrel. In pre-salt today, with no shipping and government charges, the price hits US $ 2.50.

“Since taking office, the management of Silva e Luna has been very clear on its positive point of view on the continuity of the divestment plan. It is normal that, especially at the time of the exchange, the person who joined has a certain fear, and this is why there was a freeze, a moment of adaptation, even to review the processes “, assess- he does.

The concern for the divestment agenda helps the public enterprise to achieve its main objective, which is to have lower debt, to be able to distribute the wealth, via dividends or on a more permanent basis. “There is no doubt that today the stock of debt is larger, especially when you factor in pairs, and that means Petrobras can distribute less profit. The oil industry is mature and has a very high demand for dividends and profitability. “, says Arbetman.

“From the ‘divestments, investments and parity’ tripod, what continues to raise doubts is the question of prices. Today we feel a certain asymmetry in this policy, and this asymmetry is one of the main reasons we see it trading at a discount. compared to When we look ahead, and we see a new electoral cycle, we continue with doubts on the radar about the pricing policy, “says the analyst from Ativa Investimentos.

A final expectation from stakeholders concerns Petrobras’ conduct towards the green agenda, the energy transition. “It is a process that does not have to go back, it has already started, and it needs to be approached as transparently as possible. This is another point to watch out for and whatever the color of the picture. party, we know that Petrobras, as it has governance exercised by the executive, remains very sometimes it depends on the preferences of the one in charge, ”explains Arbetman.

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