Current PBR Stock Info

Petrobras plans to reduce its $124 billion debt, dropping its debt-to-EBITDA to 2.5 by 2018

Brazil’s state-owned Petroleo Brasileiro (ticker: PBR) released both its strategic, and business and management plans for 2017 to 2021 as the company looks to rebuild trust with investors as Petrobras, as the company is commonly referred to, attempts to deleverage amid a corruption probe. Petrobras is the most in-debt oil and gas company in the world, a distinctively unpleasant position to hold as oil prices remain below $50 per barrel. The company hopes to reduce net-debt-to-EBITDA from its current level of 5.3x to 2.5x by 2018.

“The idea is to accelerate our financial recovery over the next two years,” said Pedro Parente, who took over as CEO in June.

In order to achieve that goal, Petrobras intends to speed up divestitures and focus in on core oil and gas operations. According to the company’s plan, Petrobras will sell a total of $19.5 billion in assets in order to meet its funding goals and help pay down its $124 billion in debt. The accelerated divestitures will allow the company to fund its operations without the need for net borrowings from 2017 to 2021, according to its presentation.

Source: Petrobras

Source: Petrobras

It appears that the divestitures will come from biofuel production, LPG distribution, fertilizer production and petrochemical interests from which the company said it plans to “[withdraw] entirely.” Petrobras also said that it plans to restructure its energy businesses by consolidating its thermoelectric assets and other businesses in this segment, seeking “the alternative that maximizes value for the company.”

PBR also said that it would be reviewing the positioning of its lubricants business.

The company’s plan was based on assumptions for international oil prices at $48 a barrel in 2017; $56 a barrel in 2018; $68 in 2019; $71 in 2020 and 2021. The local currency, on which Petrobras based its plan, was projected to weaken gradually to 3.55 reais per dollar in 2017 and to 3.78 reais per dollar in 2021. The Brazilian real ended Monday’s session at 3.2755 per dollar.

Petrobras reduces future investment by 25%

The company also announced as part of its plans today that it will be cutting future investments by a quarter. Petrobras’ new plan calls for $74.1 billion in investments through 2021 compared to $98.4 billion when the company outlined its investment plans in January.

Source: Petrobras

Source: Petrobras

The company said in its presentation Tuesday that it would be prioritizing the development of deep-water production, with a focus on strategic partnerships. Petrobras believes that, even with the significant cut in future investment, the company will produce 3.41 MMBOEPD in 2021.

Petrobras is ranked eighth (by production) by Forbes in its 2016 list of the world’s largest public oil and gas companies, fitting in between Chevron and Russia’s Lukoil.

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