Petrobras changes to take time, even with new CEO

Wed Feb 4, 2015 5:35pm EST
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By Jeb Blount

RIO DE JANEIRO (Reuters) - Investors betting that a long-awaited management change at Brazil's Petrobras will result in a swift rebound of the state-run oil company's fortunes are likely to be disappointed.

Even with changes at the top, there is little sign that Petroleo Brasileiro SA, as the company is formally known, will quickly recover from Brazil's largest-ever corruption scandal. The personnel changes will also mean little if the government of President Dilma Rousseff fails to ease up on political interference in the company or recognize the full extent of its problems.

Preferred shares of Petrobras are up 24 percent so far this week, largely on the expectation that Chief Executive Officer Maria das Graças Foster would step down.

Petrobras announced the departure of Foster and five other senior executives, including Chief Financial Officer Almir Barbassa and exploration chief José Formigli, in a terse note early Wednesday. The resignations came well ahead of an expected late-February departure date and took a government that wanted more time to find replacements by surprise.

But it will take more than a new CEO to extract Petrobras from a multibillion-dollar price-fixing, bribery and political kickback scandal. Serious change will require action from the company's real boss, President Rousseff, who was chairwoman of the Petrobras board from 2003-2010 and remains closely involved in its affairs.

Between her time on the board and as Brazil's president, Rousseff has directed Petrobras during a 12-year period notable for giant oil discoveries but also for soaring debt, cost overruns, missed production targets and project deadlines.

It was also a period in which some Petrobras executives engaged in systematic overpricing and bribery with engineering firms and other suppliers, prosecutors say. Both Rousseff and Foster deny any knowledge of the scam, and neither has been charged with any wrongdoing.

The investigation into Petrobras has helped push down the company's share price by nearly 60 percent since September, forcing it to scale back investments and hampering its ability to raise money. Turning that around will be a daunting task for any CEO.   Continued...

Carnival masks of Brazilian President Dilma Rousseff (L) and resigned Petrobras Chief Executive Maria das Gracas Silva Foster are seen at a costume factory in a suburb of Rio de Janeiro February 4, 2015.  REUTERS/Ricardo Moraes