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February 26, 2014 4:07 am
Petrobras has sliced $16bn off its five-year investment plan, as Brazil’s petrol subsidies have strained the finances of the state-controlled company and turned it into the world’s most indebted oil producer.
The Rio de Janeiro-based company said on Tuesday it would invest $221bn between 2014 and 2018, down from $237bn in its previous five-year plan – one of the world’s largest corporate spending programmes.
The announcement came as the company reported that its net profit had declined to R$6.3bn ($2.7bn) in the final three months of 2013, down 19 per cent from the same period in 2012. Net sales rose 10 per cent to R$81bn from a year earlier.
Although the profit result was better than analysts had feared, it provided yet another indication of the deteriorating financial position of Brazil’s largest company.
Petrol price controls combined with rampant demand from Brazil’s new middle class consumers have forced Petrobras to import fuel at a loss for the past three years, costing the company billions of dollars.
To make ends meet, the company has taken on record amounts of debt, which have ballooned in local currency terms as the Brazilian real has fallen against the US dollar.
Petrobras’s net debt surged 50 per cent to R$221.6bn in December last year from R$147.8bn at the beginning of 2013.
The company has also been burdened with the responsibility of developing Brazil’s vast deep water, or “pre-salt”, oil reserves. Faced with these pressures, Petrobras management has worked to cut costs: last year the company saved R$6.6bn under its Procop plan, almost double its original R$3.9bn target for 2013, it said.
As well as trimming its investment programme, Petrobras also unveiled a strategic plan on Tuesday that set out the company’s goals until 2030, replacing a more ambitious 2020 blueprint.
“The context of today’s environment, which is the basis for the 2030 strategic plan, has changed materially since the previous strategic plan was formulated in 2007,” the company said.
Avoiding any discussion of Brazil’s controversial and politically sensitive fuel policy, Petrobras largely blamed the 2008 financial crisis, the shale gas revolution in the US and the different local regulatory environment.
After more than doubling output to 5.2m barrels of oil and natural gas a day by 2020, production is likely to stabilise and remain at the same level for the following decade, the company said.
In a bid to reassure rating agencies, Petrobras also promised that its leverage would begin to fall as of 2015.
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