Embattled Brazilian state owned firm Petrobras has made deeper cuts to its previously announced 2015-2019 business plan, with the company announcing a 25% drop in capex today (12 January).
Petrobras will drop its planned capital expenses by US$32 billion in its 2015-2019 business plan, down from the previously announced $130.3 billion it listed last June. Today, the company said its new planned capex is $98.4 billion, with $80 billion (or 81%) going toward exploration and production activities.
The revised numbers for 2016 show a slight increase over last October’s revised estimates. Today, Petrobras says it will increase E&P investment from the $19 billion stated in the October forecast to $20 billion. The revision, Petrobras said, keeps Brazilian E&P projects a priority, with an emphasis on pre-salt. Additionaly, Petrobras updated its 2015 investments, saying that in October it had planned to spend $25 billion on E&P, but its projections stated that only $23 billion spent in 2015.
“Given the magnitude of 2015 spending cuts and the number of major projects under development, Petrobras may be finding difficulty in identifying further opportunities for capital spending reductions,” says analyst Guy Baber at Simmons & Co. “Recall that the $130 billion five-year plan, disclosed in June 2015, had itself been cut by 41%, or $90 billion. Over the last two years,” he says, “Petrobras has cut its five-year investment plan by $120 billion, or by $24 billion per year.”
Additionally, operating costs in 2015 were maintained at $29 billion, but Petrobras did not give an estimate for 2016, saying that the number is currently under revision.
“These adjustments are designed to preserve the fundamental objectives of deleveraging and the generation of value for shareholders established by the 2015-2019 [business plan] in the light of new oil price and exchange rate levels,” the company said.
Petrobras did not change the projection for disinvestments in 2015-2016, opting to remain at $15.1 billion with $0.7 billion in 2015 and $14.4 billion in 2016.
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