Brazilian President Dilma Rousseff said her administration would be willing to evaluate government assistance to support state oil company Petroleo Brasileiro SA if conditions in the energy market deteriorate.

“We won’t rule out that it could be necessary to evaluate,” Rousseff said Friday in Brasilia, responding to a reporter’s question about a possible capitalization of the company. “It’s not just the Brazilian government that won’t rule it out; no government would rule it out.”

But at a separate event in Rio de Janeiro hours later, Petrobras Chief Financial Officer Ivan Monteiro told reporters that the company isn’t weighing a share sale, nor is it considering asking for any kind of government rescue.

Petrobras is already trying to sell assets as it confronts an ongoing corruption scandal, the collapse of oil prices and a massive debt burden. Earlier this week, it cut spending plans and reduced estimates for its production growth.

Despite Rousseff’s cautious show of support, a source on her economic team said the Treasury didn’t have cash readily available for such a capitalization. In order to provide assistance, it would probably need to assume more debt, increase taxes or print money, according to the person, who asked not to be named discussing private policy considerations.

Rising Debt

Those options might not be palatable for several reasons: the country’s rising debt load has already prompted a series of downgrades in the past year; additional tax hikes would hit hard in an economy reeling from recession; and printing reais would risk stoking inflation that’s running at a 10.79-percent clip, well above the central bank’s target.

One option recently under consideration was the use of hybrid debt-equity securities to inject money into the company without immediately diluting shareholders, according to a Dec. 10 interview with Petrobras Chief Executive Officer Aldemir Bendine, who added that the idea was in an early stage.

UBS Group AG analysts including Lilyanna Yang wrote Jan. 13 that there were “high risks” of a Petrobras equity offering, although a share sale wasn’t likely to occur in 2016.

The fallout for investors would depend on the structure of the deal, according to a Jan. 11 research note from Credit Suisse Group AG’s Andre Natal and Regis Cardoso. The government could possibly pursue a structure that dilutes itself rather than minority shareholders, according to the analysts.

Rousseff’s press office declined to comment on the statements about the Treasury. The finance ministry press office didn’t respond to an e-mail and phone call seeking comment.

In her remarks to reporters, Rousseff reiterated her confidence in Petrobras’s deep-water oil fields in the region known as the pre-salt. She said it’s an “extremely advantageous” asset that is still viable even with the price of oil hovering around $30 a barrel. She said auctioning pre-salt fields in these oil-market conditions would be like “giving away” 30-year exploration rights.

Petrobras shares fell Friday, extending months of losses
Petrobras shares fell Friday, extending months of losses

Petrobras preferred shares fell 8.1 percent to 5.23 reais at 4:43 p.m. in Sao Paulo Friday, as Brent prices fell to the lowest in almost 12 years.

“The government is always concerned with Petrobras, especially when exogenous factors put the company in this situation,” Rousseff said.