Petrobras Slashes Contentious Dividends and Buys Back Shares

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(Bloomberg) — Petroleo Brasileiro SA slashed politically contentious dividends after profits declined and the Brazilian oil major set a more conservative policy for shareholder payouts. Shares declined.

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The Rio de Janeiro-based producer’s board approved dividends of 15 billion reais ($3 billion), according to a filing on Thursday. It is down from 24.7 billion reais in the first quarter and the lowest dividend since Petrobras started making payments on a quarterly basis at the start of 2022.

Any surplus cash could be used to pay extraordinary dividends, and the company will look into this possibility toward the end of the year, Chief Financial Officer Sergio Caetano Leite said during an earnings call on Friday. Petrobras will also buy back up to 157.8 million preferred shares over the next 12 months.

“The buyback begins conservatively, without provoking large fluctuations in price,” Leite said, adding that the company expects to complete the program ahead of schedule.

Read More: Petrobras Offers High Payout, Capex an Overhang: Company Outlook

The reduced dividends brings Petrobras’s payouts in line with those made by other major oil producers. In 2022 Petrobras paid more dividends than any oil company apart from Saudi Arabian Oil Co.

Common shares were down 3.1% to 33.25 reais at 1:14 pm in Sao Paulo.

Read More: Petrobras Falls as JPMorgan Downgrades, Dividend Euphoria Fades

President Luiz Inacio Lula da Silva has attacked Petrobras’s dividends as overly generous for investors and said profits should be invested in oil refining and the energy transition.

Meanwhile, oil majors in Europe and the US continue to prioritize investor payouts even after profits tumbled from record highs seen last year. Shell Plc, TotalEnergies SE, ExxonMobil Corp., BP Plc and Chevron Corp. have all kept cash flowing back to shareholders through dividends and share buybacks.

Petrobras has reduced dividends to 45% of free cash flow, and the company remains committed to paying at least $4 billion a year unless total debt rises above limits set in its business plan.

Net income tumbled 47% to 28.8 billion reais in the second quarter on lower oil prices, rising operational costs, and a sharp drop in international crack spread for diesel.

(Updates to include CFO comments starting in third paragraph)

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