| RIO DE JANEIRO, Sept 19
RIO DE JANEIRO, Sept 19 Brazil's heavily
indebted state-led oil company Petrobras will likely cut planned
investment by about a sixth and its 2020 output goal by 14
percent under a five-year strategic plan that could be released
as early as Monday after markets close, according to analysts.
Petroleo Brasileiro SA, as the company is
formally known, is expected to announce a 2017-2021 capital
budget of $82.7 billion, or an average of $16.6 billion a year,
according to the average estimate of eight analysts surveyed by
That would be Petrobras' smallest five-year capital budget
since 2006 and 16 percent less than the Rio de Janeiro-based
company's 2015-2019 plan revised in January.
The cuts would be part of Chief Executive Officer Pedro
Parente's fight to curb the company's nearly $125 billion of
debt, the largest in the world oil industry, and focus spending
on crude oil exploration and production needed to pay
Parente's efforts are complicated by oil prices at
some of their lowest levels in a decade, a corruption scandal
that has undermined investor confidence and huge losses on
money-losing refineries and domestic fuel subsidies.
Petrobras' said last week that its board of directors on
Monday would "appreciate" the plan, under development since
June. If approved, Petrobras is expected to release the plan
"This plan is very important for setting expectations at a
company that has consistently missed expectations," said Luana
Sigfried, oil and gas analyst with Raymond James in Houston.
"The company will have to cut enough to show it's being
realistic, but not so much that its future output falls too
When combined with a promise to sell $15 billion of
oilfields, pipelines and other assets by year-end and $43
billion through 2018, Parente said he hopes the plan will focus
cash on the company's portfolio of giant offshore oil
discoveries south of Rio de Janeiro.
Petrobras' controlling shareholder, the Brazilian
government, is also counting on those fields to kick-start
Brazil's recession-mired economy. Petrobras is responsible for
about 10 percent of Brazil's gross domestic product.
The plan will also show how far Parente, appointed by new
President Michel Temer, is prepared to go to let the company
reverse the policies of former Brazilian President Dilma
Rousseff, removed from office for breaking budget laws in
A former Petrobras board chairwoman, she built up Petrobras
during a commodities boom only to see her plans unravel along
with nearly $250 billion of shareholder value.
"The new five-year business plan is the most important
trigger in the short term," said Diego Mendes, analyst at Banco
Itau BBA in Sao Paulo in a note to clients. "If the plan is
sufficiently robust it will help sustain the positive dynamic
for Petrobras shares."
Petrobras' preferred shares, its most traded class of stock,
have risen 96 percent so far this year.
Lower spending, though, will also cut future crude output in
Brazil to about 2.32 million barrels a day (bpd), according to
the average estimate of six analysts surveyed by Reuters. That's
14 percent below the company's current 2020 outlook of 2.70
In 2012, before the corruption scandal, cash crunch and oil
price plunge, Petrobras said it planned to produce 4.9 million
bpd in Brazil in 2020. At the time Petrobras was investing more
than $45 billion a year.
Some analysts also expect Petrobras' to cut asset sale plans
after success in refinancing short-term debt and after a
strengthening Brazilian currency reduced the cost of Petrobras
debt, most of it in dollars.
"It is our view that they would likely lower (asset sale)
goals as the urgency for selling assets has decreased," Mendes
said a note to clients.
(Additional reporting by Paula Laier and Guillermo Parra Bernal
in Sao Paulo; Editing by Joseph Radford)