Petrobras: Another CEO Exits; Risk of Political Interference Harming Shareholders Increases Further

Following first-quarter earnings, Petrobras CEO Jean Paul Prates has resigned. Prates had reportedly clashed with Brazilian President Luiz Inacio Lula da Silva about the decision not to pay out special dividends earlier this year, as expected by the market. Since Lula took office in early 2023, the company has come under pressure for its prior strategy of divesting lower-quality assets, focusing investment on offshore oil assets, and paying out a high percentage of free cash flow to shareholders. As a result, it increased investment, including into renewables, and reduced its payout ratio to 45% from 60% with its recent strategic update. We found both actions to be detrimental to shareholders.