Brazil's Petrobras rebounds as board meets on succession

SAO PAULO (Reuters) – Brazilian state-run oil group Petrobras recovered some of its recent share price losses on Tuesday as the board met to consider Brazil President Jair Bolsonaro’s nomination of a retired general to replace the company’s market-friendly CEO.

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Shares in Petroleo Brasileiro SA, as the company is officially known, rose as much as 8% after back-to-back losses that had wiped 100 billion reais ($18.33 billion) from its market value.

The board meeting to consider the appointment of Joaquim Silva e Luna, a former defense minister with no experience in the oil and gas industry, will be closely watched by investors looking for signs of division on the government-dominated board.

Chief Executive Roberto Castello Branco was among the directors set to participate in the virtual meeting, putting him in the awkward position of voting on his own successor.

President Bolsonaro criticised Castello Branco last week after a series of fuel price increases, spooking investors over a possible return to politically motivated fuel pricing that hammered Petrobras revenue over the past decade.

Bolsonaro went on the attack again on Tuesday, telling supporters there were “many things wrong” at Petrobras. “The new CEO will clean things up there,” he added.

While talk of a mass board resignation to protest against Castello Branco’s replacement has largely faded since Bolsonaro broke the news late on Friday, sources close to the matter said some directors may yet resign.

“The board members’ voting count will be an important milestone, in our view,” UBS analyst Luiz Carvalho said in a research note reiterating his “buy” rating on the shares and calling the recent selloff an “overreaction”.

Carvalho pointed to various brakes on the government’s power to dictate strategy and fuel pricing at Petrobras, including a Minas Gerais state judge’s order on Monday compelling Bolsonaro and Petrobras to explain the reasons for the change in command within 72 hours.

Luna, who has been running the giant Itaipu hydroelectric dam on Brazil’s border with Paraguay, has already signed documents that will kick off the standard pre-hiring ethics scrutiny at state-owned Petrobras.

One source said Petrobras could name an interim CEO before Castello Branco’s term ends on March 30.

($1 = 5.4564 reais)

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