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Petrobras cuts spending plans again

15 Jan 2016 19:44 GMT
Petrobras cuts spending plans again

The company is revising down its spending plans, with the lower oil price just one of the many major challenges that it faces

Rio de Janeiro, 15 January (Argus) — Brazilian state-controlled oil firm Petrobras has cut about $32bn in capital expenditure from its 2015-19 business plan as it tries to reduce record-high debts in the face of the lower oil prices.

The reduction has prompted the firm to downgrade its production targets — it now plans to produce 2.15mn b/d of liquids, including crude and natural gas liquids, in Brazil this year, down from 2.19mn b/d under the previous plan. And it cut its 2020 domestic liquids production goal further, to 2.7mn b/d from 2.8mn b/d, which was down from 4.2mn b/d under its 2014-18 plan.

Petrobras produced 2.18mn b/d in Brazil last year, just above its 2.13mn b/d goal and representing 4.5pc growth from 2014. The firm in October cut about $11bn from planned investment spending for 2015-16. It missed its $25bn investment target for 2015 by $2bn, but has raised its 2016 spending plan to $20bn from $19bn.

The company aims to fund the short-term investments by cutting costs and selling assets. Petrobras cut $1bn in operating expenses in 2015 and initially planned to trim a further $6bn this year, although this target is under review.

Petrobras has reduced its oil price assumption for 2016 to $45/bl from an earlier $55/bl, and adjusted its currency exchange rate assumption to 4.06 real/$1 from R3.80/$1. A continuing political crisis stemming from an investigation into systemic corruption at the oil firm has weighed on the real for more than a year, as have lower oil prices. The weakening of Brazil's currency is particularly problematic for Petrobras, which has about $100bn in dollar-denominated debt.

The company says it has about $25bn in financing options available, and is considering more upstream platform sale and leaseback deals. Financing secured by future oil production is among the funding deals now under consideration.

1707245

Petrobras spending plan for 2015-19$bn
New planShare of total %Old planShare of total %
Upstream80.081108.683
Downstream10.91112.810
Gas and Power5.466.35
Other2.122.62
Total 98.4100130.3100



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