Petrobras has announced that it will pay out at least twice as much in dividends as the largest international oil producers. This action by the Brazilian oil company will help to replenish the government’s coffers in the context of a tense presidential campaign.
Petrobras pays $17 billion in dividends
Petrobras announced that it would pay $17 billion in dividends. This is well above the last record shareholder distributions of between $4 billion and $7.6 billion. These were paid out by the five largest Western oil producers. These are Exxon Mobil Corp, Chevron Corp, Shell PLC, TotalEnergies and BP.
Petrobras has decided to distribute 60% more than its $10.5 billion profit to shareholders. This huge payment could lead to underinvestment in the company, critics say.
In addition, Petrobras’ dividends were lower than those of Saudi Aramco. However, the latter produces five times more than Petrobras, i.e. 13 million barrels per day. For its part, Aramco has decided to distribute $18.76 billion to shareholders per quarter.
Exxon, the U.S. producer, posted the highest profit of the five majors. In contrast, the company spent only $7.6 billion on distributions to shareholders.
A call for help from the government
The Brazilian government has asked Petrobras and other state-controlled companies to increase their dividends. This increase would be used to fund additional federal spending. A call for help from the government that comes at a time when the president, Jair Bolsonaro, could face difficulties regarding his re-election.
In particular, Jair Bolsonaro circumvented a constitutional spending cap to fund a massive cash transfer program to low-income voters. Thus, Bolsonaro wants to strengthen his re-election chances by pushing through short-term spending measures. However, according to the polls, the latter behind the former president Luiz Inacio Da Silva.
Petrobras said in a statement:
“The payment of an extraordinary dividend has proven to be the best allocation of the company’s cash. The company is in a comfortable cash position and can retain between 8 and 10 billion in cash this year.”
Petrobras will make its dividend payment before the first ballot, scheduled for October 2. According to the company, higher oil prices and asset sales made this additional payment possible. Petrobras reaffirmed its commitment to distribute at least 60% of its free cash flow to investors.