Petrobras shares fall with Bolsonaro of Brazil doubling with intervention

RIO DE JANEIRO (Reuters) – Petrobras shares plunged 22% on Monday, eliminating 71 billion reais ($ 13 billion) in market value, with Brazilian President Jair Bolsonaro again cracking down on his pricing policies after replacing state-owned oil market favorable to the CEO with a retired army general.

The liquidation, after a series of downgrades by analysts, deepened after Bolsonaro said the company’s fuel policy only appealed to selected financial markets and groups in Brazil and should be changed as part of an effort to reduce gasoline prices and of diesel.

Overall, the past few days have marked a dramatic turnaround for Bolsonaro, a right-wing populist whose interventionist instincts have so far been largely contained by economically conservative allies.

The shares of state-owned Eletrobras also plunged on Monday, after Bolsonaro said that this would be the next sector in which the government “would stick its finger”.

In comments to Rádio Bandeirantes do Brasil on Monday, Joaquim Silva and Luna, the man chosen by Bolsonaro on Friday to take the reins of Roberto Castello Branco, suggested the idea of ​​a government fund, or “cushion”, to decrease the effects of fluctuating fuel prices on consumers.

Bolsonaro doubled his criticism of Castello Branco, scoffing at his decision to distance himself from the start of the coronavirus pandemic, the severity of which the president has repeatedly downplayed.

“Now, the current CEO of Petrobras, let’s be clear, he has been at home for 11 months without working, working remotely. Now, the boss has to be on the front line, “said Bolsonaro, adding:” This is unacceptable to me. “

BONDS ALSO HIT

Analysts at Credit Suisse, Santander, Scotiabank, Bank of America, Bradesco and XP were among those who downgraded their recommendations on the shares of Petróleo Brasileiro SA, as the producer based in Rio de Janeiro is known.

“A good reputation is hard to earn and easy to lose,” said Thiago Duarte, an analyst at BTG bank, in a note to customers.

The dollar-denominated debt issued by Petrobras also suffered heavy losses with the 2043 security falling 7.6 cents for trading at a seven-month low of 98 cents on the dollar, Refinitiv data showed.

Morgan Stanley removed its ‘like’ recommendation on Brazil’s sovereign bonds on Monday, citing fiscal concerns and the potential side effect of removing Castello Branco.

Petrobras’ “very important” pricing policy and its implications for cash generation and planned asset sales, especially from its refineries, have clouded its debt reduction and dividend outlook, Santander analysts led by Christian Audi said in a note to customers . They downgraded their recommendation on shares to “keep” from “buying”.

General director Rodolfo Saboia, of the oil regulatory agency, ANP, said that the change in the CEO would not affect the country’s policy of opening the refinery sector to private investment or the search for free markets. He declined to comment directly on sales at Petrobras refineries.

“The best way to try to reach a fair price is to open the market … and not depending on an actor to define the price that a certain product should have,” he told Reuters in an interview.

In a Facebook post after the close of trading on Friday, Bolsonaro announced the appointment of Silva and Luna, a former defense minister who runs the giant Itaipu hydroelectric plant, to replace Branco.

The retired general, who has no experience in the oil and gas sector, said in an interview with Rádio Bandeirantes that he had not discussed and had no opinion on a possible privatization of the company.

On Saturday, Silva and Luna told Reuters that the company needed to find “balance” in fuel prices, considering the impact on shareholders, investors, sellers and consumers.

CVM, the Brazilian securities industry watchdog, on Monday announced the opening of an investigation into the change in leadership, confirming an earlier Reuters report on the matter.