Petrobras accelerates adjustments

March 14, 2019

Funding of US $ 3 billion will reduce the cost of the state’s total indebtedness

Petrobras has taken advantage of the improvement in the international environment for Brazil – with a drop in the cost of CDS (credit default swaps) – to raise US $ 3 billion in bonds with maturities between 10 years and 30 years. Although the value of the issue is not very significant for a large company, it will reduce the cost of Petrobras’ total indebtedness, since the funds will be used to repurchase the outstanding paper that was sold at higher interest rates. This is part of the adjustment policy implemented in Pedro Parente management and accelerated in recent months, with the arrival of Roberto Castello Branco.

After announcing the results of 2018, which showed the return of profits, Petrobras announced a few days ago the first steps to implement the Management and Business Plan valid for the next five years.

One of the objectives is to speed up the divestment program, with the inclusion of more mature onshore and shallow water oil and gas fields. Another purpose is to cut manageable operating expenses by US $ 8.1 billion (6.6% of the total amount of US $ 122.6 billion budgeted for 2019-2023).

And a third goal is to release funds that are in cash for “reallocation to more productive uses,” according to the company.

Petrobras’ adjustments, initiated under Michel Temer’s government to face the calamitous situation left by the previous Dilma Rousseff, are not exempt of burdens. The sale of oil fields, coupled with the decline of mature fields, has contributed to a fall in crude production over the last two years. But the appreciation of the dollar and the high prices of the commodity helped Petrobras to recover profitability and generate shareholder value, as the company intends.

The next steps should be the launch of voluntary redundancy plans to reduce staffing and a sales schedule for refining units.

The bond issue was a good market test after Petrobrás received a better rating from rating agencies Standard and Poor’s and Fitch Ratings.

The goal is to transform the company into a low-cost producer, said Castello Branco days ago. This will make it easier to overcome the common fluctuations in the oil market.

Source: Estadao | opinion

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