Petrobras may have lost more in the corruption scandal than it previously revealed
Petroleo Brasileiro SA-Petrobras has been involved in a corruption scandal took place in April last year. An investigation was started in March 2014, followed by prosecutors’ alleged ex-officials of the company of working a contract kickbacks arrangement, together with a number of suppliers who charged excess amount to the Brazilian oil company for its schemes.
Falling prices of oil and the scandal have left the company struggling, along with Petrobras taking around impairment charges of around $17 billion in April this year, shown in its financial results. The company said, $2.1 of the charges was linked to overpayments in the corruption outrage.
However, a federal prosecutor of the country Deltan Dallagnol believes that the corruption related overpayments applied this year was “just the tip of the iceberg.” On Friday, Mr. Dallagnol said that the real losses of corruption might exceed $5.32 billion, as per Reuters. The forecast accounts for complete losses along with the illegal profit made by construction companies from charging extra to Petrobras, said Mr. Dallagnol.
Mr. Dallagnol leads the interrogation into Brazil’s biggest scandal and is amongst the Brazilian task force. Over 100 people have been arrested since the start of the corruption investigation including major company and political figures.
As he believes the real amount loss to be higher than two fold, shareholders are concerned regarding the additional possible impairment charges.
As the company faced the corruption scandal, the situation gets worse by a significant decline in oil prices, caused by increasing supply of oil across the globe. Crude oil prices declined from more than $100 bpd last year to 6 years lows to approximately $37. Presently, WTI futures stand at $49.63 a barrel, whereas Brent oil stands at $52.65 a barrel.
Due to the corruption scandal the company has witnessed significant losses. Petrobras stock which went up to $19.57 last year in August has declined to $5.66 currently. In the last 12 months, the company’s stock has lost approximately 70% of its market value, as corruption related news derailed its production plans and growth.
Petrobras stock news suggests that in spite of positive movement of stock price at the moment, the company witnesses’ major challenges. Petrobras debt burden is more than $20 billion, which is the highest debt for any energy company across the globe. The scandal is still a big challenge. As economy of Brazil is remains uneven, the company has a bumpy long road ahead of itself.
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