Petrobras cuts vessel contracts amid oil rout

RIO DE JANEIRO, Brazil (Bloomberg) -- Petroleo Brasileiro SA has canceled five platform-supply vessels from two separate contractors as a rout in oil prices and rising borrowing costs force Brazil’s state-controlled producer to deepen spending cuts.

Ultrapetrol Bahamas Ltd. had three vessel contracts terminated ahead of schedule and World Wide Supply AS had two contracts canceled, the companies said in separate statements Monday. Petrobras didn’t immediately respond to an e-mail seeking comment.

Ultrapetrol plans to negotiate with Petrobras and also seek work for the ships in other markets, it said. The company still has six supply ships under contract with Petrobras and plans to compete in upcoming tenders for subsea support vessels, it said. World Wide has alerted bondholders that Petrobras doesn’t plan to pay $3 million in backlog costs related to the contracts, it said.

Petrobras, the biggest producer in deep waters, is deepening spending cuts this year amid the oil price collapse and a mushrooming graft scandal that has resulted in the suspension of more than 20 domestic and international suppliers who have been cited in the investigation. The company is adopting a series of operational and management cost cuts, including a voluntary plan to reduce working hours for administrative staff, the company said Sept. 15. This year it slashed planned investments by more than a third.