Brazil’s Petrobras Slashes Investment Budget for Second Time

Petrobras, Brazil’s state-run oil producer, yesterday slashed its investment plan for the third time in just over six months as it tries to preserve cash to pay its debt, the industry’s largest.

According to Petrobras, investment portfolio adjustments caused the oil output projection for Brazil to drop from 2.185 million barrels per day to 2.145 million barrels per day in 2016, and from 2.8 million to 2.7 million barrels per day in 2020. The high side price target estimate was found to be $11.80, whereas, the lowest price target was set at $2.70. “We will likely see more of the same shortly”. The company now projects 1 dollar to equal 4.06 Reals, up from its projection of 3.26 Real in the month of June a year ago. In fact, Petrobras is now the most indebted oil company in the world, with more than $127 billion in liabilities as of Q3’15. ConclusionOverall, the investors are advised to “Sell” any equity held in Petróleo Brasileiro S.A. – Petrobras considering its disappointing financial position with significant total debt of $134.83 billion against weaker total cash position of $27.75 billion only, restricting the company to make future growth investments. The company also said it expected Brent crude oil price – a benchmark for global oil prices – to average at $45 per barrel in 2016. The integrated energy company is particularly focused on controlling exploration expenses while mainly spending on production development.

The Ibovespa fell0. 9 percent to 39,589.44 at 1:53 p.m.in Sao Paulo as half of its 61 stocks declined.

With three consecutive years of GDP contraction, Brazil has now reached the dreaded “recession” threshold. About $10.9 billion is earmarked for distribution and refining, with the rest being allocated to gas and energy and other areas. The Company’s offering comprises road transportation products such as Automotive Gasoline, Diesel Fuel, Natural Vehicular Gas, Lubrax; agriculture and cattle raising products such as Sunflower Meal, among others; Industrial products such as Solvents and Paraffins, among others. But the amount offered was insufficient for Petrobras. The idea was to carry out the purchase and then sell part of the assets to smaller first such as Tecpetrol.