How Will Petrobras Fare in 2016?

This year is not likely to be a good one for Petroleo Brasileiro SA Petrobras (NYSE: PBR) and its CEO Aldemir Bendine. Based on recent reports, several market analysts think that the CEO will have to battle some challenges ahead, including low prices of crude oil, sluggish economy of Brazil, a multi-billion dollar corruption issue, as well as workers’ unions. Furthermore, there are a lot of people who doubt the ability of the CEO in terms of successfully overcoming these market obstacles.

The decline in commodity markets and the corruption issue have led to an increase in the debt levels of the energy company. The current debt burden of Petrobras stands at $130 billion, making it the most indebted corporation in the energy sector. In the past couple of months, the financial performance of the multinational energy firm has not been quite remarkable.

During the third quarter of fiscal year 2015, the state-owned energy giant released a report indicating a net loss amounting to $97.3 million. Together with this, the report has shown that the company stock witnessed a decline of about 37 percent in the past year. This negative trend is believed to continue this 2016, since the external environment of the company has not significantly changed.

During the previous year, the president of Braxzil Dilma Rousseff  assigned Mr. Bendine to aid Petrobras with its recovery from the huge corruption issue. Unfortunately, during the 11-month tenure of the CEO, he wasn’t able to impress the other executives and investors of the oil corporation. Although Mr. Bendine was able to solve several major financial issues of the company through his leadership skills, the CEO failed to implement sufficient measures to save the state-operated energy firm from its countless problems.

According to a source, the Petrobras CEO only spends 3 days in the company, regardless of the constantly declining oil market and the ongoing investigation about the issue of corruption. Mr. Bendine was given a nickname of “TQQ” (Tuesday, Wednesday, Thursday) in Petrobras.

People have raised questions about his management skills and ability to handle people because he failed to reach his asset divestiture target in 2015, and was also not able to effectively deal with the workers’ union during the month of November last year.

Even though the oil major has managed to survive last year, the lack of experience of the CEO, as well as its failure to give attention to the operations of Petrobras may have an adverse effect. Market analysts and economists asserted that the outlook for fiscal year 2016 appears bleak since the commodity markets and the economy of Brazil are not expected to improve soon.

During a recent conference, the Petrobras CEO has acknowledged that the firm has serious issues that need to be addressed. Yet, he stays positive regarding the future of the oil company, as he noted that the situations are “totally manageable.”

A number of analysts believe that the prices of crude oil will not recover in the near-term and the corruption scandal investigation is also not likely to be completed soon. With this, they pointed out that Mr. Bendine must begin focusing his efforts on the operations of the firm, in order to boost investor confidence and financial condition.

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