Petrobras (PETR3) plummets 7.47% on the Stock Exchange with profit and return to cooking gas

Petrobras is experiencing a sharp decline in the Stock Exchange after releasing its second-quarter financial results and announcing a return to cooking gas (LPG) distribution on Thursday, August 7, 2025. Ordinary shares (PETR3) fell 7.47%, quoted at R$32.95, while preferred shares (PETR4) dropped 5.2%, at R$30.84, by 12:45 PM on Friday in Rio de Janeiro. The market reacted negatively to the net profit of R$26.652 billion, in line with expectations, but with dividends of R$8.66 billion, below the R$12.1 billion projected by XP. The decision to reenter the gas distribution sector, approved by the Board of Directors, also raised fears of political interference in pricing, impacting investor confidence. The strategy, which aims to integrate LPG into the company’s strategic plan, reignites debates about governance and profitability.

The decline reflects concerns over rising operating expenses and falling Brent crude oil prices, which pressured the EBITDA (earnings before interest, taxes, depreciation, and amortization) by 14% year-on-year, reaching $10.2 billion. Despite increased production, free cash flow was affected, limiting dividends. Petrobras’ president, Magda Chambriard, defended the reentry into the gas market during a conference call with analysts, emphasizing the pursuit of “open doors” to expand the fuel market.

• Decline factors: Lower-than-expected dividends, increased capex, and fears of price intervention.
• Petrobras’ strategy: Resumption of LPG and potential expansion into diesel and other fuels.
• Historical context: Exit from the sector with the sale of Liquigás in 2020 under Bolsonaro.
• Immediate impact: Sharp drop in shares on B3, with effects on governance perception.

Market Reaction to Distribution Strategy

The decision to return to the cooking gas market sparked divisions among analysts. Banco Safra warned that the move could open the door to price interference, compromising the state-owned company’s profitability. Petrobras, which previously operated in the sector through Liquigás until 2020, plans to integrate LPG distribution into its Refining, Transportation, and Commercialization (RTC) and Gas and Low-Carbon Energy (G&E) businesses. However, the company has not detailed how the operation will work, such as direct sales to consumers or partnerships with distributors.

Fears of political interference gained traction after statements from President Luiz Inácio Lula da Silva, who criticized the high prices of gas cylinders, sold by Petrobras for R$37 but reaching consumers at R$110 to R$140. The company faces the challenge of balancing social interests, such as price reduction, with investors’ expectations for robust financial returns.

• Price concerns: Lula highlighted the gap between Petrobras’ cost and the final price.
• Governance scrutiny: Analysts see risks of political decisions affecting profitability.
• Privatization history: Liquigás was sold for R$4 billion to Copagaz and Nacional Gás.

Financial Results Under Scrutiny

The net profit of R$26.652 billion in the second quarter, while higher than the R$2.6 billion loss in the same period of 2024, was 24.3% lower than the previous quarter. Increased capex, combined with falling Brent crude prices, impacted free cash flow, reducing dividend distribution capacity. BTG noted that the company’s leverage increased, limiting financial flexibility.

Citi analysts considered the results below expectations, highlighting that rising operating expenses were not offset by production growth. Monique Greco from Itaú BBA emphasized that the lower dividends were the main driver of the market’s negative reaction. Petrobras announced R$8.66 billion in dividends and Interest on Capital (JCP), below projections from banks like XP.

• Net profit: R$26.652 billion, down 24.3% from the first quarter.
• Dividends: R$8.66 billion, against XP’s expectation of R$12.1 billion.
• EBITDA: $10.2 billion, down 14% year-on-year.
• Production: Growth mitigated impacts but did not prevent the stock market drop.

History of Exiting the Distribution Sector

Petrobras exited the gas and fuel distribution market during Jair Bolsonaro’s administration (2019-2022). In 2020, Liquigás, which held 21.4% of the LPG market, was sold for about R$4 billion to a consortium of Copagaz, Nacional Gás, and Itaúsa. BR Distribuidora, now Vibra, was privatized in stages between 2017 and 2021, generating R$26 billion for the state-owned company. The strategy, led by then-president Roberto Castello Branco, focused on debt reduction and deep-water oil exploration.

The exit from distribution reduced Petrobras’ control over final consumer prices, drawing criticism from Lula and the current administration. Magda Chambriard highlighted the need to resume synergy between production and commercialization, especially with projected increases in diesel and gas by 2029. However, the company faces a non-compete clause preventing reentry into liquid fuels until 2029.

• Liquigás: Privatized in 2020, with 23 operational centers and 4,800 resellers.
• BR Distribuidora: Sold in stages, with the final phase completed in 2021.
• Contractual clause: Prevents return to liquid fuels until 2029.
• Past strategy: Focused on exploration and debt reduction under Bolsonaro.

Outlook for Cooking Gas

The resumption of LPG distribution is seen as part of the government’s social agenda to reduce gas cylinder prices for the population. Petrobras plans to integrate distribution into its low-carbon businesses, but the lack of operational details keeps the market cautious. The company is exploring direct sales to large consumers, such as industries, and evaluating partnerships to expand LPG reach.

Magda Chambriard stated that the company aims to “monetize” the growing production of gas and diesel, but Banco Safra analysts warn of the risks of price interference. The return to the sector also reignites debates about Petrobras’ governance, with investors monitoring potential impacts on the company’s autonomy.

• Social goal: Reduce gas cylinder prices, which reach R$140 in some states.
• Planned expansion: Direct sales to industries and partnerships with distributors.
• Risks highlighted: Political interference may compromise profit margins.
• Growing production: Diesel S10 expected to increase by 200,000 barrels per day by 2029.

Investor and Analyst Repercussions

The market’s reaction reflects uncertainty about balancing social and financial goals. Rising capex, combined with a declining EBITDA, raised concerns about Petrobras’ financial sustainability. The return to LPG, while strategic, is seen as risky due to contractual limitations and a history of interference.

Citi and BTG analysts recommend caution, noting that high leverage may limit new investments. XP highlighted that the lower-than-expected dividends reinforce perceptions of reduced shareholder returns. Petrobras, however, maintains its vertical integration strategy, aiming to operate “from well to pump” to maximize profits.

• Leverage: Increased in the second quarter, limiting financial flexibility.
• Recommendations: Banks suggest caution with Petrobras shares.
• Vertical integration: Strategy aims to connect production and commercialization.
• Dividends: Main factor for the share drop on Friday.