Petrobras may distribute dividends despite loss
Even posting losses this year, Petrobras may pay dividends and interest on equity for 2020, depending on the evolution of its debt. The state-owned oil company has announced new rules for its shareholder remuneration policy and now will consider cash generation instead of profit to decide when to pay investors. The change also paves the way for extraordinary distributions from 2022 onwards if the company manages to achieve its debt reduction target.
Under the rules approved by the board of directors, Petrobras may distribute dividends and interest on equity even in loss-making years. For that, net debt must have fallen in the previous 12 months and the management team has to be sure that the company's financial sustainability is preserved. The Brazilian Corporate Law determines that companies can only pay dividends based on net income, accrued profits and profits reserve.
According to the criteria defined in the new rules and the company's earnings so far, Petrobras may pay dividends and interest on equity for this year, even though the loss is virtually irreversible. Despite being in the red in 2020, a tough year impacted by the plunge of oil prices, the company's net debt is still falling - it went from $79 billion at the end of 2019 to $71 billion at the end of June.
By opening the possibility of paying dividends and interest on equity even in loss-making years, Petrobras gives a positive signal to investors who were already taking for granted they would see no remuneration in 2020. The company's shareholders navigated four years without payout due to losses from 2014 to 2017, but the state-owned company had posted a profit two consecutive years before that. In particular, the news is good for the federal government, the largest shareholder of the oil company, which is struggling with growing deficits in public accounts amid the crisis unleashed by the covid-19 pandemic.
The changes in the rules also pave the way for Petrobras to increase further its profit payments from 2022 on. The oil company announced last year a new shareholder remuneration policy linked to the company's debt reduction. From the moment that gross debt falls to less than $60 billion, it will pay amounts higher than the minimum mandatory through a formula that provides for the distribution of 60% of the difference between operating cash flow and investments.
From now on, however, at the moment that gross debt falls to less than $60 billion, the company will be able to...
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