November 10, 2011 / 1:44 PM / 7 years ago

PREVIEW-Currency drop likely weighed on Petrobras earnings

* Weaker real probably spurred a 44 pct profit tumble     * Revenue to rise from year earlier on crude oil bounce     * Petrobras to release data Friday after markets close     By Brian Ellsworth and Sabrina Lorenzi     RIO DE JANEIRO, Nov 10 (Reuters) - Brazilian state oil company Petrobras (PETR4.SA) looks set to report a 44 percent drop in third-quarter profit as a tumble in local currency drove up operating and financial expenses, offsetting a jump in revenue.     Earnings fell to 4.8 billion reais ($2.7 billion) in the quarter from 8.6 billion reais a year earlier, according to the average estimate of six analysts in a Reuters poll. That would be down 56 percent from the second quarter.     The Rio de Janeiro-based company, which is carrying out the world's largest oil and gas investment plan at about $225 billion, will report the results after Friday's market close.     A sharp drop in the real in the third quarter boosted the value of the company's debt denominated in foreign currencies. That currency slide has already weakened the earnings of other big Brazilian companies, including miner Vale VALE5.SA.     Some analysts calculated Petrobras' exposure to dollar-denominated liabilities at $41 billion at the end of September. "Expect high foreign exchange-related losses" for the quarter, UBS analyst Lilyanna Yang said in a report.     The currency losses offset an increase in revenue spurred by higher prices for Brent crude LCOc1, which ranged between $100 and $110 per barrel in the third quarter, compared with $70 to $80 a year earlier. Still, oil output slipped 1 percent, Petrobras has said.     <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^     GRAPHIC on Brazil oil finds     GRAPHIC on shareholders     FACTBOX on Brazil oil finds                [ID:nN01243765]     ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>     Compared with the previous quarter, revenue edged up 2 percent, but earnings fell due to the currency dip and higher expenses. Second-quarter profit was close to a record, largely because of currency-linked gains.     REFINING MARGINS     The results will probably show continued strain on Petrobras' refining division, which posted a $1.4 billion loss in the second quarter due to a government-backed policy of keeping fuel prices fixed despite an increase in oil prices.     Petrobras raised wholesale prices of diesel and gasoline on Nov. 1 in a move that was coordinated with a reduction in a federal fuel tax so that the company's revenue will increase while prices at the pump will remain stable. [ID:nN1E79R1WJ].     Investors welcomed the increase, saying it will give Petrobras more cash to carry out its investment plan.     Preferred shares of Petrobras, its most widely traded class of stock, have lost close to 20 percent of their value this year, in part on concerns that government policies will limit profitability.     Earnings before interest, taxes, depreciation and amortization, a gauge of operational profitability, probably rose 6.4 percent from a year earlier.     Petrobras hopes to become one of the world's largest publicly listed oil companies over the next decade by expanding output in the deepwater offshore region known as the subsalt. This area, the size of New York state, is believed to hold more than 50 billion barrels of oil.     Following is a summary of analysts' estimates for Petrobras' third-quarter earnings, in Brazilian reais: ===============================================================               Q3 2011      Q2 2011     Q3 2010   PCT CHANGE                                                    (y/y) =============================================================== Net Revenue   62.74 bln   61.47 bln  54.74 bln   14.6 pct EBITDA        15.67 bln   16.14 bln  14.74 bln    6.4 pct Net income     4.84 bln   10.94 bln   8.57 bln  -43.5 pct ===============================================================     ($1=1.76 reais)  (Editing by Lisa Von Ahn)

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