Petrobras May Say Profit Rose on Higher Oil Prices: Week Ahead

By Jeb Blount

Aug. 11 (Bloomberg) -- Petroleo Brasileiro SA, Brazil's state-controlled oil company, may say second-quarter profit rose 16 percent on higher crude prices and the first increase in domestic gasoline costs since 2005.

Net income rose to 7.86 billion reais ($4.92 billion) from 6.80 billion reais a year earlier, according to the median estimate of four analysts surveyed by Bloomberg News. Petrobras will report earnings today in Rio de Janeiro.

``We're expecting one of the best results in the company's history,'' said Lucas Brendler, an analyst with Porto Alegre- based Geracao Futuro, which has 16 percent of its $5 billion of assets in Petrobras stock. ``The increase in fuels for two months of the quarter should really help.''

Petrobras, Brazil's largest company by market value, lifted domestic prices of gasoline by 10 percent and diesel by 15 percent May 2, the first increase since September 2005. That helped boost quarterly net revenue, which excludes sales tax, 28 percent to a record 53.3 billion reais, according to the survey.

Brazilian President Luiz Inacio Lula da Silva had Petrobras keep prices of gasoline, diesel and bottled cooking gas stable for almost three years to contain inflation. Products including aviation fuel and fuel oil were regularly adjusted to reflect swings in world prices.

Crude oil almost doubled in the 12 months to the end of the second quarter June 30 to $140 a barrel. The price has since fallen 17 percent.

The surge in crude and fuel prices probably drove Petrobras sales growth, as the two products account for almost half of the company's revenue, Felipe Cunha, an oil analyst at Brascan Corretora, wrote in July 28 preview of second-quarter earnings.

Output Growth

Production also rose in the quarter. Total oil and natural gas equivalent output increased 3.8 percent to an average 2.39 million barrels a day from 2.30 million barrels a day a year earlier, Petrobras said July 15 on its Web site.

Higher revenue may be used to bolster a $112 billion expansion plan for 2008-2012 that's under review in the wake of the Tupi discovery off the coast of Rio. With as much as 8 billion barrels of oil, Tupi is largest oil find in the Americas since 1976.

Petrobras preferred shares fell 0.9 percent to 33.55 reais in Sao Paulo trading Aug. 8. In the last 12 months, the stock rose 36 percent, compared with a 7.5 percent gain in the benchmark Bovespa index. Petrobras's $206.6 billion market value makes it the world's 11th largest company.

Markets

Last week, the real fell 3 percent to 1.6087 per dollar, the biggest weekly decline since November. The yield on the government's zero-coupon bond due January 2010 fell 0.17 percentage point to 14.66 percent, according to Banco Bradesco SA.

The benchmark Bovespa index dropped 1.8 percent to 56584.40 points. Cia. De Bebidas das Americas, Brazil's largest beverage maker, was the biggest gained in the week with a 16 percent increase. JBS SA, the world's largest beef producer, fell 15 percent, the most within the Bovespa index.

The following is list of events in Brazil this week:

Event                                        Date
Weekly trade balance                         8/11
Petrobras, Cemig earnings                    8/11
Gol, OGX earnings                            8/12
June Retail sales                            8/14
Gafisa, Cyrela earnings                      8/14
Tam, Banco do Brasil, Usiminas earnings      8/14

To contact the reporters on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net