Brazil’s Petrobras Announces Reduction in Investments

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The government controlled oil giant of Brazil, Petrobras, announced it has reduced its forecast for investments this year and next year. According to the company, investments will be reduced by US$11 billion and operational expenditures by US$7 billion for the next two years due to the decline of international oil prices and the recent appreciation of the U.S. dollar.

“To maintain its fundamental goals of deleveraging the company and creating value for shareholders, Petrobras is adjusting its projections for investment and manageable operating expenses,” said the statement released by the oil company.

Petrobras officials also noted that during the announcement of the 2015-2019 Business Plan in June the company had stated that the execution of the proposal would be subject to risk factors which could adversely impact its forecasts.

Among the risks mentioned by the company were market variables such as oil prices and the foreign exchange rate. At the time Petrobras had already announced a reduction by 41 percent in investments in comparison to the previous forecast plan.

The company reaffirmed however that the 2015-2016 forecast for disinvestments (selling off of company assets) is maintained at US$15.1 billion, with around US$700 million in 2015 and US$14.4 billion in 2016. Daily average oil production targets are also unchanged with 2.125 million barrels per day in 2015 and 2.185 million barrels per day in 2016. In September Petrobras executives announced the company was not renewing third-party contracts to reduce spending.

The announcement was well received by the market, which saw it as a positive sign of transparency by the company. Petrobras stock on Tuesday rose by five percent, helping boost Brazil’s main stock market index, the Ibovespa, which closed up by 0.29 percent at 47,735.11 points.