RIO DE JANEIRO—Brazilian state-controlled oil company Petró leo
Brasileiro SA said Friday it will settle part of its massive tax
liabilities with the government at a cost of 2 billion reais ($572
million) in the third quarter.
The decision, and a similar pay-up announced earlier this month
that hurt Petrobras' second-quarter results, came as Brazilian
authorities grasp for tax income to stem a widening fiscal deficit
amid a flailing economy. Under a tax-amnesty program launched Aug.
3, Petrobras has been able to end certain tax disputes on what it
considers to be favorable terms.
But the settlements come at a time when Petrobras, too, is
hard-up for cash. With one of the highest debt loads in the
corporate world—415.55 billion reais in total debt at the end of
the second quarter—the company has plans to sell off nearly $60
billion in assets by 2018. Petrobras also slashed almost $77
billion from its investment budget over the next five years.
It isn't clear whether potential settlements with Brazil's
tax-hungry government will be significant enough to alter that
picture. According to its 2014 annual report, Petrobras has 98
billion reais in "contingent" tax liabilities—possible losses that
have not been provisioned in financial statements because they
remain in dispute.
Several analysts complained about the lack of clarity
surrounding tax disputes in a conference call last week after
Petrobras reported a 90% drop in second-quarter net profit. The
decline was due in part to a 3.9 billion reais charge related to a
similar settlement.
Chief Financial Officer Ivan Monteiro responded to an analyst's
question that because the tax-amnesty ordinance "is a very recent
one," the company was "still assessing" the final impact.
In the settlement announced Friday, Petrobras got a 50% discount
on a 6 billion reais tax debt related to its failure to withhold
and pay income tax on remittances to an overseas subsidiary for
payment of petroleum imports in 1999-2002, 2004, 2005, and 2007-12.
Much of the 3 billion reais that Petrobras has agreed to pay is
either in judicial escrow or can be covered by tax credits, but
Petrobras said it will suffer a negative 2 billion reais impact in
the third quarter.
Write to Paul Kiernan at paul.kiernan@wsj.com
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