MOSCOW (MRC) -- Brazilian state-run oil company Petroleo Brasileiro SA (Petobras) has outlined an ambitious target for debt reduction it said won't impact oil production, raising familiar concerns at a company that has grown famous for misplaced optimism, reported The Wall Street Journal.
In a closely watched annual presentation of its five-year business plan, Petrobras said its domestic output of oil and liquefied natural gas, or LNG, will rise to 2.77 million barrels a day in 2021, up from an average of 2.09 million in the first eight months of this year.
At the same time, the company said it would slash capital expenditures to USD74.1 billion in the 2017-21 period, a 25% reduction from the 2015-19 period. Petrobras also plans to sell USD19.5 billion in assets during 2017-18, up from a target of USD15.1 billion in 2015-16.
Petrobras' lofty goals were met with skepticism by some outsiders, who expect the austerity measures to weigh on its production and, consequently, cash flow. Adriano Pires, a longtime Brazilian oil consultant, said the company’s oil output will likely fall to around 2.3 million barrels a day given the cuts it is making.
"The explanations they gave today at the press conference didn’t convince me," Mr. Pires said. "Optimism has always been Petrobras’ original sin."
Roughly between 2008 and 2014, Petrobras’ business plans became known for increasingly euphoric outlooks that ultimately forecast its domestic oil output rising to 5 million barrels a day by the end of this decade. To develop massive offshore oil reserves, along with Brazil’s refining capacity, the company budgeted as much as USD220 billion in investments for a five-year period.
But since announcing the USD15.1 billion goal in mid-2015, the company has raised just over USD4 billion, highlighting investor concerns about Petrobras’ ability to get good deals for its oil and gas assets amid the current downturn in commodity prices.
As MRC reported earlier, Petrobras is seeking to sell its 5.8 billion Brazilian real (USD1.4 billion) stake in petrochemical producer Braskem SA. Petrobras hired Brazilian bank Banco Bradesco SA as a financial adviser and has started to pitch the sale to foreign investors. Petrobras owns a 36 percent stake in Braskem, Latin America's largest petrochemical producer. The sale would help Petrobras meet its target of selling USD15.1 billion worth of assets in 2015-16, a key part of its plan to cut debt as oil prices plunge to 12-year lows.
Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.