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Feb. 25, 2021, 2:39 a.m. EST

Petrobras income soars after impairment reversal

By Jeffrey T. Lewis

SÃO PAULO--Brazilian oil company Petróleo Brasileiro SA, or Petrobras, said profit jumped in the fourth quarter as it reversed an impairment it had made because of the drop in the price of oil at the start of the coronavirus pandemic.

The Rio de Janeiro-based company reported a net profit attributable to its shareholders of 59.9 billion reais, equivalent to $11.1 billion, in the quarter, compared with net income of 8.2 billion reais in the same period a year earlier.

Recurring net income, which excludes one-time items, rose to 28.4 billion reais from 12.9 billion reais a year earlier

Adjusted earnings before interest, taxation, depreciation and amortization increased 28.8% from a year earlier to 47 billion reais. Revenue fell 8.3% to 75 billion reais.

In the first quarter, the company recognized impairments, or a decline in the value of its assets, of 65.3 billion reais. The company reversed part of that amount, 31 billion reais, in the fourth quarter because of the subsequent rise in the price of oil and other factors, boosting its net income.

The price of a barrel of crude had plummeted in March amid a conflict over market share between Saudi Arabia and Russia, falling to levels not seen in decades. Demand also dropped because of the impact on economic activity of social distancing and business closures to fight the spread of the coronavirus.

The state-controlled company has slashed its pile of debt and sold off a series of non-core assets since Roberto Castello Branco took over as chief executive officer in Jan., 2019. Such policies could now be at risk because of Brazilian President Jair Bolsonaro's effort to replace Mr. Castello Branco with an army general after a dispute over the company's fuel pricing policy, some analysts said.

Mr. Bolsonaro called an almost 10% increase in the price of gasoline and an almost 15% increase in the price of diesel fuel that the company announced last week excessive, and promised changes. On Friday he nominated Joaquim Silva e Luna, an army general, to replace Mr. Castello Branco, and on Tuesday the company's board voted to hold a shareholder meeting to consider the nomination.

While it's still not clear if Mr. Silva e Luna will replace Mr. Castello Branco, the turmoil surrounding the company's top manager led to a more than 20% decline in Petrobras's share price on Monday as investors reassessed the outlook for the company amid government interference in its management and pricing policy.

"Regardless of the quality of Petrobras's results for the fourth quarter, we note that they do not reflect the company's current reality," said Gabriel Francisco, an analyst at XP Investimentos.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

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