Brazilian oil group Petrobras keeps breaking records. After reaching record output levels and pulling off a weighty stock issue in 2000, Petrobras is set to break a national record in corporate profits.

Analysts bet the huge group, due to release earnings in coming weeks, will post net profits in the range of 10 billion reais ($5.03 billion) in 2000, an almost sixfold increase from 1.7 billion reais the year earlier.

With high oil prices and an average annual increase in production of 12 per cent last year, Petrobras has good reason to celebrate. But analysts say the company should make the most of it now because it will not last.

Once Petrobras releases its 2000 earnings sometime between February 15 and 23 the focus will turn to 2001 and the outlook for profits amid an expected decline in oil prices. "You have to be cautious because its profit really is impressive, but the tendency is for profits to fall in following quarters, along with oil prices," said Marcio Brito, an analyst at Banco Icatu.

Last year, benchmark Brent crude oil posted an average price of $32 a barrel. For 2001, the market forecasts an average price of around $25 a barrel, a target also adopted by Petrobras, analysts say.

Brito expects Petrobras' fourth quarter to produce profits similar to the third, or close to 2.2 billion reais. The impact of high oil prices and increased production was offset by a decline in the Brazil's currency against the dollar, he said.

"Operating costs were in line with the third quarter, but financial expenses increased, since about 80 percent of Petrobras' debt is denominated in dollars," Brito said. Petrobras' posted profit of 6.7 billion reais in the first nine months of 2000.

Forecasts from five analysts interviewed by Reuters put Petrobras' 2000 net profit in a range between 9.2 billion reais and 11.5 billion reais. The outlook for annual revenue ranged from 44.4 billion reais to 49.5 billion reais.

The most optimistic analyst, Marcelo Aguiar at Santander, pointed to an improvement in Petrobras' efficiency levels. "It is evident that the company is much more efficient and I am quite optimistic about the growth in production."

Petrobras will now have to maintain efficiency and production gains to offset lower prices, Aguiar said. "This year's result is going to depend a lot more on the increase in production than on oil prices," he added.

This year, analysts forecast production increases of 12 per cent, in line with the 2000 increase. That would take average production to 1.42 million barrels a day, from 1.27 million barrels a day. With lower oil prices, analyst Monica Araujo of BES Securities expects 2001 profit to decline to 8 billion reais with revenue of about 42 billion reais.

"Last year was atypical, because of oil prices. This year, even with the increase in production, profit will be less." "No other company in the world had a production growth like this, this is really significant."

But analysts agreed that 2000 was Petrobras' best year. This year "will not have the same charm," said Fernando Oliveira, an analyst at Fator Doria Atherino.

Still, profits will continue to expand and Petrobras will remain well ahead of the average Brazilian company in terms of profitability, analysts said. Only last week, Petrobras proudly announced it was Brazil's only representative on the list of the World's Most Admired Companies, published by Fortune magazine.

Although Petrobras is still the only company in Brazil that actually is producing oil, it will soon have to compete with big foreign oil firms. Those have been exploring Brazil's oil fields since the country opened up its crude reserves for foreign drilling in 1997, ending Petrobras' 45-year monopoly.