Peter Millard and Martha Beck Tue, February 28, 2023, 12:10 PM ESTIn this article:
(Bloomberg) — Brazil’s state-controlled oil company Petrobras sank on growing concerns that it will slash dividends and start subsidizing fuel under President Luiz Inacio Lula da Silva.
Most Read from Bloomberg
- Elon Musk Regains His Spot as the World’s Richest Person
- Nigeria Latest: Tinubu Wins in Six States; Obi Takes Three
- Apple Suppliers Are Racing to Exit China, AirPods Maker Says
- Nigeria Latest: Tinubu Wins Most Votes in Presidency Race
- TD Bank to Pay $1.2 Billion to End Suit Tied to Ponzi Scheme
The government will change the company’s dividend policy, using some of the hefty dividends it has rewarded shareholders with for investments focused on energy transition instead, a person familiar with the matter said. Some of the money will also be used to fulfill the company’s “social purpose,” the person said, asking not to be named because the information isn’t public.
Petrobras’ voting stock fell as much as 4%, the most in about a month. Preferred shares, which are more liquid, erased gains on the news, which was first reported by website G1.
The shares had already lost steam earlier after the company said it was cutting gasoline and diesel prices. The announcement came less than a day after Finance Minister Fernando Haddad said he would ask the company to lower them to compensate for a tax exemption on fuels that expired Tuesday.
Petrobras Cuts Diesel, Gasoline Prices Amid Fuel Tax Talks
Oil majors the world over are flush with cash after oil prices soared last year, putting them under scrutiny for windfall profits at a time consumers are suffering from inflation. Lula’s Workers’ Party has a history of having Petrobras subsidize diesel and gasoline when in office.
“It’s their old playbook,” said Fernando Valle, an analyst at Bloomberg Intelligence. “It harks back to the early 2010s, when Petrobras’s fuel pricing policy drove it to be the most indebted company in the world.”
The record dividends Petrobras has been paying are the result of a major turnaround over the past six years. It has slashed leverage, boosted production and curbed expenditures, leaving Lula with what analysts consider a well-managed company with a strong balance sheet.
Most Read from Bloomberg Businessweek
- Microsoft Expands Game Pass as Regulators Fret Over Activision Deal
- This Road Could Save the Planet—and Carve Up Alaskan Wilderness
- The NFL’s Top Talent Agency Bought by Venture Investors
- Higher Interest Rates Slam Stocks and Profits But Spare Workers
- The Fed-Up Copywriter Who Helped France Finally Embrace #MeToo
©2023 Bloomberg L.P.
