Brazil Pushes Out Petrobras CEO, Names Ex-Regulator to Top Job

Wednesday, May 15, 2024

The chief executive of Brazil's Petrobras offered to step down, the state-run oil company said on Tuesday, as the government lined up a former regulator for the role, sending shares sliding as investors braced for political interference.

Brazilian President Luiz Inacio Lula da Silva will replace the outgoing CEO Jean Paul Prates with Magda Chambriard, the former head of Brazilian oil and gas regulator ANP, according to a securities filing citing the Mines and Energy Ministry.

New York-listed shares of Petrobras fell more than 6% in after-hours trading as news broke that Prates was headed for the exit.

The ouster of Prates represents a win for members of Lula's cabinet pushing for lower fuel prices, smaller dividends and more capital spending to create jobs and boost the economy.

"In our view, the exit of Prates is a deterioration of Petrobras governance and a downside risk for the investment thesis," Citi analysts Gabriel Barra and Andres Cardona told clients in a note. "The new CEO arrives with the pressure to fulfill the investment plan and accelerate the capex expansion, which may negatively impact the company's dividend payment."

The Petrobras board will meet on Wednesday to discuss the proposed departure of Prates, the company's press office said.

Since he took over as CEO in January 2023 Prates has tangled repeatedly with Energy Minister Alexandre Silveira, who has openly criticized the company for not doing enough to lower prices at the pump or boost Brazil's economy with investments.

Silveira's criticisms often echoed Lula's own concerns about Petrobras, which he has said should do more to help the country.

The dispute between Silveira and Prates hit fever pitch in March, when the company's board – largely appointed by Silveira – defied Prates and withheld an extra dividend expected by investors, which weighed heavily on Petrobras shares.

Chambriard, who started her four-decade career in the energy industry as an engineer at Petrobras in 1980, headed up petroleum regulator ANP from 2012 to 2016, under a previous government run by Lula's leftist Workers Party.

She was considered a top prospect for the Petrobras CEO job after Lula won the 2022 election, and that December, she gave an interview to Reuters echoing many of his views on the company.

At the time, she criticized a policy of weekly fuel price adjustments tracking global markets, which Petrobas has since scrapped. She also called for more development of natural gas and criticized large dividends to shareholders, arguing that profits should be reinvested in energy exploration and output.

(Reuters - Reporting by Rodrigo Viga Gaier and Marta Nogueira in Rio de Janeiro; Additional reporting by Andre Romani in Sao Paulo and Lisandra Paraguassu in Porto Alegre; Writing by Fabio Teixeira; Editing by Brad Haynes, Leslie Adler and Sonali Paul)

Categories: People Industry News Activity South America Oil and Gas

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