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Brazilian President Lula fires Petrobras CEO over dividend dispute




Brazilian President Lula fires Petrobras CEO over dividend dispute

(Bloomberg) — Shares of Brazilian state oil company Petroleo Brasileiro SA fell after President Luiz Inacio Lula da Silva fired CEO Jean Paul Prates following a dispute over dividend payments.

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Prates’ dismissal was confirmed late Tuesday by people familiar with the matter who asked not to be identified discussing private matters. Petrobras, as the company is commonly known, said in a statement late Tuesday that Prates is expected to officially resign at an upcoming board meeting.

The company’s American depositary receipts fell as much as 10% on Wednesday before the start of regular trading in New York.

“The sudden change in management creates significant uncertainty,” Regis Cardoso, an analyst at XP Investimentos, wrote in a note to clients. “We expect the shares to react negatively.”

Lula, as the president is known, plans to appoint Magda Chambriard, the former head of Brazil’s oil and gas regulator, to replace Prates, another person familiar with the matter said. Petrobras confirmed that the Ministry of Energy had nominated her as CEO.

Prates’ departure ends months of speculation that his days at the helm of Petrobras were numbered. Tensions escalated earlier this year when he refused to join government-appointed board members who voted to withhold payouts of extraordinary dividends to shareholders who had grown accustomed to stable returns.

The resignations could heighten concerns that Rio de Janeiro-based Petrobras is coming under increasing pressure from the ruling Workers’ Party to revive Brazil’s industry and create jobs at the expense of shareholders. The dividend drama shocked some investors who saw it as a sign of increasing political interference in Latin America’s top oil-producing country.

After weeks of debate, Petrobras finally agreed to return half of its available cash to investors through a special dividend, as Prates’ board of directors had initially proposed. The government is the largest shareholder, and dividends have helped fill the budget deficit while spending increases.

Prates told the Executive Board before the official announcement that Lula had asked for his position back. In a message seen by Bloomberg, he said his mission was “prematurely aborted,” blaming Alexandre Silveira, the energy and mining minister, and Rui Costa, Lula’s chief of staff, with whom he had clashed .

Prates, a former senator from Lula’s left-wing party with a history of working in the oil industry, became CEO in January 2023, shortly after Lula resumed the presidency. Petrobras had fired six CEOs, including interim CEOs, from 2019 until Prates’ appointment.

Under his leadership, Petrobras changed direction, halted asset sales, protected consumers from sharp swings in global oil prices and set aside billions of dollars for investments in the energy transition. The company recently increased the budget for its five-year business plan to $102 billion, its largest spending plan since 2015.

Petrobras said it received a message from the Energy Ministry late on Tuesday confirming that it would propose Chambriard to replace Prates.

The engineer started her career at Petrobras in 1980 and worked at the company for 22 years before moving to Brazilian oil regulator Agência Nacional de Petróleo, Gás natural e Biocombustíveis, better known as ANP. She was appointed head of the agency by former Brazilian President Dilma Rousseff in 2012 and held the position until 2016.

Like Prates, Chambriard was part of Lula’s energy transition team in 2022. At that time, she had already been identified as a possible candidate for Petrobras’ top job. The former ANP head has defended the need for Brazil to explore for oil in new areas, including the Equatorial Margin and the Pelotas Basin.

“The pre-salt boom is over. It is time to push new boundaries so that Brazil can continue to produce oil,” she told Bloomberg in an interview in December.

Chambriard also supports more investment in domestic oil refining, and wants more raw materials to be processed in Brazil rather than exported as raw materials.

Prates’ ouster marks a deterioration in Petrobras’ governance, and Chambriard’s mission will not be easy, Citigroup Inc. said. in a note. She “comes with pressure to execute the investment plan and accelerate Petrobras’ capex expansion” and this could result in lower dividend payments, the company said.

–With help from Rachel Gamarski, Peter Millard, and Leda Alvim.

(Updates to include Petrobras shares in pre-market trading)

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