(Bloomberg) -- Petroleo Brasileiro SA plans to pay as much as $55 billion in dividends through 2029 as part of its latest business plan, drawing a line under a political dispute that flared earlier this year over the use of the oil company’s cash. Shares rose.
Brazil’s state-controlled oil producer could also pay up to $10 billion in extraordinary dividends over the period, it said in a filing on Thursday. Petrobras also approved the payment of 20 billion reais ($3.4 billion) in extraordinary dividends.
Shares rose as much as 4.1% in Sao Paulo on Friday after the announcement on dividends.
The approval of extraordinary dividends and the robust forecast for future payments turns the page from a tumultuous period in the beginning of the year. The previous chief executive officer, Jean Paul Prates, was accused of prioritizing shareholder payments over investments by rivals in the Lula administration, and was eventually pushed out of the role. This week Petrobras’s management and the government-controlled board of directors approved dividends without any drama.
Chief Executive Officer Magda Chambriard said on Friday that the strategic plan is “extremely feasible, realistic and easy to deliver.”
Shareholder payments are one of the major attractions for investors in Petrobras and other international oil majors. Petrobras’s dividends have also helped shore up the finances of the government, its biggest shareholder. The company’s policy is to pay dividends as long as it doesn’t compromise financial health, it said.
Buy Ratings
Analysts have rewarded the continuation of shareholder payouts with favorable recommendations. Eighty-three percent of analysts have a buy rating on the stock, according to data compiled by Bloomberg.
Rio de Janeiro-based Petrobras confirmed that it’s strategic plan rose almost 9% to $111 billion. Still, it trimmed estimated capital spending in 2025 to $18.5 billion, down from $21 billion.
“This could be well-received by the market and create upside risks for the payment of extraordinary dividends going forward,” analysts at Goldman Sachs said in a note to clients. “Management has been vocal on running the company with a minimum level of cash, which we believe open rooms for additional shareholder remuneration.”
Most of the outlays — $77 billion — will go to exploration and production projects in Brazil and abroad. The business plan includes ten new offshore production units, and another five vessels to be added after 2029. Petrobras also has an additional six production vessels under study, including a twelfth platform for its giant Buzios field in the pre-salt region in deep waters of the Atlantic.
Debt Levels
Petrobras increased its debt ceiling to $75 billion from $65 billion at a time it’s increasing investments to expand oil and gas production. It reduced its minimum cash holding to $6 billion from $8 billion. Both measures give the company more flexibility to pay dividends while it continues to invest.
Petrobras became the most indebted oil company in the early 2010s when it embarked on a massive expansion to its refining and offshore production facilities, and a return to higher debt levels would be concern for investors.
Chief Financial Officer Fernando Melgarejo said during an interview in September that an increase to the debt ceiling wouldn’t necessarily mean more debt, but would give the company more flexibility in debt management. Petrobras is under pressure to continue rewarding shareholders with dividends while also spending enough to help the government meet its economic growth targets.
Renewable Spending
Investor concerns that Petrobras would ramp up spending on less profitable renewables projects haven’t materialized. The next five-year plan slightly increases planned spending on energy transition projects.
The plan earmarks $11 billion to gas, energy and low-carbon projects, and only 27% of this spending is for projects that are already being implemented, while the rest are still under analysis and may not go forward.
The renewables strategy focuses on biofuels, onshore wind and solar and calls for returning to ethanol production. It also includes projects for biomethane, hydrogen and carbon capture. Another $5.3 billion will go towards reducing emissions from its operations.
Brazil’s main oil workers union, known as FUP, released a statement that criticized the payment of extraordinary dividends, saying that it slowed the energy transition and put energy security at risk.
Refining and related business lines such as fertilizer and logistics will account for about $20 billion in expenditures.
--With assistance from Leda Alvim.
(Adds shares move in third paragraph, comments from CEO in fourth paragraph)
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