#petrobras Slashes Budget 40%, Introduces 5-Year Spending Plan Of $130bn #capex

By 29th June 2015 Industry News No Comments

Petrobras’ Board of Directors approved the company’s long-delayed 2015-2019 business plan on Friday the NOC said today.

Total investments planned of $130.3bn are down approximately 40% vs. the prior 5-year program of $220.6bn as the heavily debt-burdened company tries to manage through the oil price turbulence.

The plan expresses a cautiously optimistic outlook for oil, as Petrobras based the spending levels on an assumed $60 Brent oil price in 2015 and $70/barrel during 2016-2019.

Details

The investment portfolio of the plan prioritizes oil E&P projects in Brazil, focusing on pre-salt. In fact, the E&P allocation of the budget is up significantly – to 83% vs. 70% in the previous plan.

For the other business areas, Petrobras investments will be largely limited to maintaining operations, and for projects related to offloading oil and natural gas.

The E&P investments will be broken out as follows: 86% will be allocated to production development, 11% to exploration, and 3% for operational support.

Expectations

Analysts surveyed by Bloomberg had forecast spending of $136bn over this time frame, so the cuts are slightly deeper than expected, but not a huge surprise.

The refinery cuts also make sense in the context of the recent corruption scandals – the downstream sector of Petrobras seems to be where the corruption was most egregious.

Investors and analyst have been nervous about funding, and Petrobras helped to explain some of this as well in today’s announcement. Specifically, the company plans to tap $42.6bn during 2017/2018 via internal measures including divestitures, restructuring, and demobilization of assets. During 2015/2016, the company plans $15.1bn of divestments, 30% of which will come from E&P, 30% from downstream and 40% from the gas & power segment.

Budget announcement from Petrobras>
Source: Industry News {$excerpt:n}