Professor Elam

Thursday April 23, 2015

We have been following the corruption scandal at Petrobras. Here is the latest on write offs as the WSJ says at the world's most indebted oil company. 

BRAZIL COMPANY WRITES OFF $17 BILLION

The Brazilian state oil company Petróleo Brasileiro SA is paying a hefty price for its corruption scandal, Paul Kiernan reports. The oil giant is writing off $17 billion, due to losses from graft and overvalued assets, as part of its first audited financial statements in more than eight months. The world’s most indebted major oil company wrote off 6.2 billion reais ($2.1 billion) due to alleged graft and another 44.6 billion reais for overvalued assets, including refineries. Petrobras also reported a net loss of 26.6 billion reais for the fourth quarter on revenue of 85.04 billion reais.

The corruption scandal has hurt Brazil’s economy, and Oxford Economics, an economic researcher, said Petrobras’s need to slash investments could “tip the Brazilian economy into a deeper-than-expected recession.” Petrobras Chief Executive Aldemir Bendine said additional revisions to the corruption-related write-downs are possible if prosecutors uncover more wrongdoing.

Also, a judge found Petrobras’s former downstream head guilty of money laundering and criminal conspiracy, along with several other suspected members of the corruption ring.

Farther north, oil-reliant Canada may actually benefit from low crude prices as they contribute to global spending power, Canada’s export credit agency said. That may mean higher sales of items such as cars, industrial machinery and equipment, and technology.

But the manager of an equity fund is less optimistic, and writes in Forbes that he fears the oil-industry doldrums may bring a repeat of the subprime-mortgage crisis.