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Brazil's Petrobras to invest $19 bln in 2017


Petrobras to regain its investment capacity

RIO DE JANEIRO
Petroleumworld.com 01 12 2017

Petróleo Brasileiro SA expects to spend 30 percent more in exploration, production and refining projects this year, signaling that efforts to cut debt and preserve cash are helping Brazil's state-controlled oil company regain investment capacity.

Chief Executive Officer Pedro Parente told reporters at an event in Rio de Janeiro that capital spending at Petrobras could rise to $19 billion in 2017 from $14.6 billion in 2016. Investments could be maintained around those levels if Petrobras sticks to strict fuel pricing and preserves cash.

Petrobras will follow market guidelines and not macroeconomic policy instructions to set prices for gasoline, diesel and other fuel, he said. Cash of about $22 billion should be enough to allow Petrobras to undertake activities for more than two years, Chief Financial Officer Ivan Monteiro said at the event.

"Our cash and financial position is a source of tranquility for the time being," Monteiro said.

Their remarks indicate to a large extent the success of Parente in turning around a company that a year ago was thought by many analysts to be the target of a state rescue. During his seven months at the helm of Petrobras, Parente has stretched out over $10 billion in debt payments, revamped output, set off accident-reduction goals and overhauled corporate governance.

He faces several obstacles to turning around Petrobras, the world's most indebted major oil firm, including oil price volatility, a corruption scandal highlighting governance flaws, and the legacy of policies that forced the company to enter low-yielding, money-losing business segments.

One of his top priorities is to cut the company's $130 billion of debt, amassed after years of state-led policies overstretched the company.

According to Monteiro, debt-reduction steps are helping the company regain the trust of global investors and the ability to spend wisely on exploration and production. He expects the company's debt ratings, currently below investment-grade, to be upgraded at least once before the end of this year.

Preferred shares, the company's most widely traded in Brazil, shed 0.3 percent to 15.45 reais in late Wednesday morning trading. The stock is up almost 4 percent this year.

In September, Petrobras pledged up to $74.1 billion in capital spending for the 2017-2021 period, compared with a $98.4 billion target in the prior 2015-2019 plan.



Story by Marta Nogueira; Additional reporting by Roberto Samora in São Paulo; Writing by Guillermo Parra-Bernal; Editing by Chizu Nomiyama and Grant McCool from Reuters.

reuters.com | 01 11 2016

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