On Wednesday, the CEO of Vale SA (ADR)(NYSE:VALE) also took the role of Chairman of Petroleo Brasileiro Petrobras SA (ADR)(NYSE:PBR.A). It would be challenging for Murilo Ferreira as the company is indebted oil producer and is struggling to surface from the biggest ever corruption scandal. In addition to the new Chairman, the company elected ten board members. The management changes comes a week after the Brazilian oil producer announcement of 44.6 billion-real impairment, mainly from uncompleted and overpriced refinery projects, and a graft-linked write-down valued at 6.2 billion-real.
Petroleo Brasileiro opted for the recent board overhaul as an attempt to contain losses and minimize debt load of 351 billion-real. The company also needs to deal with low crude prices that are trading close to six-year low. The selection of Ferreira is unusual as a company has a tradition of political appointees for Chairman Position. The new appointment also creates a bridge between Vale and Petrobras, the two largest exporters of Brazil.
The expert view
Marcel Kussaba, an equity analyst, said that Ferreira rectified a serious issue of capital allocation at Vale, prioritizing the projects of significance and dis-investing non-core projects. He added that it would be great if Ferreira can repeat the same success story at Petrobras. Ferreira, who will replace Luciano Coutinho, was nominated by the government. Now, the government seeks a more professional board for Petroleo Brasileiro, without government officials.
The management speaks
Aldemir Bendine, the CEO said that government provided them with a right to select a board that is more geared and professional towards the market. The board needs to have a enhanced technical market experience without the participation of the federal government members. The government elected seven of the ten board members as it controls Petroleo Brasileiro via a majority of voting shares. The minority have the right to elect two members while last one is elected by company’s employees.