Petrobras lowers five-year spending plan to $130 bn

JUAN PABLO SPINETTO

RIO DE JANEIRO (Bloomberg) -- Petroleo Brasileiro SA cut its five-year spending plan by 37% and lowered oil output targets as Brazil’s state-controlled producer battles the industry’s heaviest debt load and a slump in crude prices.

Capital expenditures through 2019 will be $130 billion, compared with the $136 billion average of three analyst estimates compiled by Bloomberg. Domestic oil production will average 2.8 MMbpd in 2020, down from a prior target of 4.2 MMbpd, the Rio de Janeiro-based company said in a statement Monday.

Petrobras is focusing spending on exploration and production, scaling back investment in refineries that have become the subject of Brazil’s biggest corruption scandal. Investors have been waiting for clarity on how the company will fund development of giant oil fields in the South Atlantic without having to return to equity markets to raise cash. In 2010, it raised $70 billion in the world’s largest share sale and failed to deliver on promised production growth.

Petrobras expects Brent prices of $60/bbl in 2015 and $70/bbl from 2016 to 2019, it said in Monday’s filing. The company is planning $42.6 billion in divestments and restructuring in 2017-2018.

Petrobras is the mostly heavily leveraged major oil producer, with a $125 billion debt load. The company joins other oil companies in cutting its spending after Brent prices dropped by more than half in the past year.

“The plan’s investment portfolio prioritizes oil exploration and production projects in Brazil, mainly in pre-salt,” Petrobras said in the statement. The production targets “were updated, reflecting the postponement of projects of lower maturity and the delays in the delivery of production units.”