Business
The CEO and five other senior executives at Brazil’s Petrobras resigned on Wednesday, as a massive corruption scandal continues to be investigated. The company’s stock jumped after the news broke. Chief executive Maria das Graças Silva Foster will step down effective immediately, the company said, and Petrobras’ board of directors will meet this Friday to choose replacements for Ms. Foster and the other five departing executives, writes the Wall Street Journal. Since the scandal erupted last March, Petrobras and Ms. Foster have maintained they were victims of the alleged corruption and weren’t aware of it until police made their first arrest in the case.
Petrobras shares rose more than 6 percent in early trading in Sao Paulo on the news, Reuters reported, extending a more than 15 percent gain on Tuesday that began with reports that Brazilian President Dilma Rousseff had decided to dismiss Foster. Investors have been betting that new leadership will help restore credibility to the scandal-tainted firm and ramp up production and boost profits. Pressure has been mounting on Rousseff to clean up Petrobras, whose reputation suffered with the arrest and testimony of three former senior executives and three dozen others, including executives of major suppliers.
Police say they have uncovered a price-fixing, bribery and political kickback scheme that allegedly benefited Rousseff's ruling Workers' Party as well as others. The illegal activity, authorities allege, diverted at least $3.7 billion and perhaps more than $28 billion from Petrobras coffers. Petroleo Brasileiro, as Petrobras is formally known, said last week that the corruption was one of several factors that helped wipe out a net 61.4 billion reais ($22.7 billion) from the value of its assets, such as refineries and oil platforms, but it refused to take a charge against earnings.
Bloomberg notes that the departure of Foster -- a 61-year-old engineer, who rose through the ranks to become the first female CEO of Latin America’s largest publicly traded oil company in 2012 -- was announced after the company lost $100 billion in market value from a September peak as she grappled to gauge the losses from the alleged kickback scheme at a time of slumping crude prices.
“A potential replacement with market friendly names could be seen as positive news in the longer term,” HSBC analyst Luiz Felipe Carvalho said in a note to investors. “However, we do not believe that the government will reduce its interference in the company during the next years.” Foster’s departure probably will improve Petrobras’ outlook because it means the government is trying to fix management and may have a more friendly approach to outside investment, according to Eurasia Group analysts led by Christopher Garman. “With low oil prices and Petrobras’s financial difficulties, the incentives to lean more on international oil companies to help develop the pre-salt have grown substantially,” the Eurasia analysts wrote about the company’s offshore discoveries. “It is clear that any substitute to Graca is likely to be someone with industry credentials and capable of conducting a ‘house cleaning’ of the firm.”
