(Bloomberg) — Brazilian President Luiz Inacio Lula da Silva fired Jean-Paul Prats, CEO of state-owned oil company Petroleo Brasileiro SA, after a dispute over dividends.
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The decision was confirmed by people familiar with the matter, who requested anonymity to discuss private matters. Petrobras, as the company is commonly known, said in a statement late Tuesday that Prats is expected to formally resign at the next board meeting.
Lula, as the president is known, intends to nominate Magda Chamberillard, the former head of Brazil's oil and gas regulator, to replace Prats, according to another person familiar with the matter. Petrobras confirmed that the Ministry of Energy had proposed it for the position of CEO.
The company's American depositary receipts fell more than 6% after the close of regular trading in New York following the announcements.
Prats' departure ends months of speculation that his days at the helm of Petrobras are numbered. Tensions escalated earlier this year when he refused to join government-appointed board members who voted to withhold the distribution of extraordinary dividends to shareholders accustomed to fixed returns.
The dismissal may heighten concerns that Rio de Janeiro-based Petrobras is under increasing pressure from the ruling Workers' Party to help revive Brazilian industry and create jobs, at the expense of shareholders. The dividends shocked some investors who saw them as a sign of growing political interference in Latin America's largest oil-producing country.
After weeks of debate, Petrobras eventually agreed to return half of its available cash to investors through a special dividend, as Prats' executive board had initially proposed. The government is the largest shareholder, and dividends have helped support the fiscal deficit at a time of rising spending.
Prats told the Executive Board before the official announcement that Lula had requested his position restored. In a letter seen by Bloomberg, he said his mission “ended prematurely,” and blamed Alexandre Silveira, the energy and mines minister, and Rui Costa, Lula’s chief of staff, with whom he had fallen out.
Prats, a former senator for Lula's leftist party with a history of working in the oil industry, became CEO in January 2023, shortly after Lula returned to the presidency. Petrobras had fired six CEOs, including interim chiefs, from 2019 until Prats' appointment.
Under his leadership, Petrobras changed direction, halting asset sales, protecting consumers from sharp fluctuations in global oil prices, and allocating billions of dollars to energy transformation investments. The company recently boosted its five-year business plan budget to $102 billion, its largest spending plan since 2015.
Petrobras said it received notification from the Energy Ministry late on Tuesday confirming that it would propose Chamberillard to replace Prats.
The engineer began her career at Petrobras in 1980, where she worked for the company for 22 years, before moving to the Brazilian oil regulator Agência Nacional de Petróleo, Gás Natural e Biocombustíveis, known as ANP. She was appointed head of the agency by former Brazilian President Dilma Rousseff in 2012 and held the position until 2016.
Like Prats, Chambrillard was part of Lula's energy transition team in 2022. At the time, she had already been identified as a potential candidate for the top job at Petrobras. The former head of the Brazilian National Police defended Brazil's need to explore for oil in new areas, including the Equatorial Margin and the Pelotas Basin.
The pre-salt boom is over. “It is time to look for new frontiers, so that Brazil can continue to produce oil.”
Chambrillard also supports more investment in domestic oil refining, and wants to see more goods manufactured in Brazil rather than exported as raw materials.
Citigroup said in a note that Ratz's ouster represents a deterioration in Petrobras' management, and that Chamboriard's task will not be easy. It said it “arrives under pressure to implement the investment plan and accelerate the expansion of Petrobras' capital expenditures” and this could lead to lower dividend payments.
–With assistance from Rachel Jamarski.
(Updates with details from third paragraph, including DOE statement and analyst comments.)
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