Petrobras Cuts Spending As Quarterly Profit Falls 19 Per Cent
Brazil's state-run oil company Petrobras moved to check years of missed targets, soaring costs and rising debt by scaling back near-term investments and setting a limit on long-term growth.
Petroleo Brasileiro SA, as Petrobras is formally known cut its five-year investment outlook for the 2014-2018 period to $221 billion, 6.8 percent less than its previous 2013-2017 plan, after reporting a 19 percent drop in fourth-quarter profit late on Tuesday.
The company also said production will more than double to 5.2 million barrels of oil and natural gas a day in 2020. After that it will plateau, averaging the same amount for the next decade according to a strategic plan ending in 2030.
Of that 2020-2030 production, Petrobras expects to own 4 million barrels a day of the output, the rest will belong to partners and the Brazilian government.
The strategy supplants a 2020 planning document that has become increasingly untenable as the government imposes new offshore exploration and development responsibilities on Petrobras and the development of shale oil and gas in North America upends the world's energy outlook.
"The phenomenon of shale gas and tight oil in the United States have been changing the world geopolitics of oil," Petrobras said in a statement. "It's in this context that Petrobras has made the big choices that guide its 2030 strategic plan."
Petrobras also said choices were influenced by change in the world economy after the 2008 U.S. banking crisis and the world recession that followed.
The new goals, also come after a 2010 overhaul of Brazil's oil legislation forces Petrobras to develop new offshore reserves. This has been made difficult by government fuel-price controls that make Petrobras to spend billions subsiding gasoline and diesel imports to help the government control inflation.
This has drained cash from the company and driven up debt, making Petrobras the world's most-indebted oil company and exacerbating the cost-overruns and delays that have dogged its previous $237 billion, five-year plan.
Under the company's new plans, refining capacity will peak at about 3.9 million barrels a day in the 2020-2030 period, nearly double the 2 million barrel a day capacity the company has today.
While Petrobras profit dropped in the quarter to 6.28 billion reais ($2.68 billion) from 7.75 billion reais a year earlier, the result beat the average 5.41 billion estimate of five analysts surveyed by Reuters.
Net sales, or total sales minus sales taxes, rose 10 percent to 81.03 billion reais in the three months ended Dec. 31, from 73.41 billion reais a year earlier, in line with analysts' estimates.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 30 percent to 15.55 billion reais from 11.94 billion reais in the fourth quarter of 2012.
While operational results were better than expected, tax, currency exchange and other financial expenses limited their impact.
Petrobras reported a full-year profit of 23.57 billion reais in 2013, 11 percent more than in 2012.
Copyright Reuters 2014.