November 28, 2019 / 2:13 PM / 18 days ago

UPDATE 2-Petrobras shares slip as production target disappoints

(Adds analyst comment, context, prior 2019 target revision)

By Roberto Samora

SAO PAULO, Nov 28 (Reuters) - Shares of Brazilian oil firm Petroleo Brasileiro SA slipped on Thursday after its oil and gas production outlook for next year disappointed analysts, despite ambitious long-term output forecasts in its new five-year strategic plan.

Petrobras, as the state-run company is known, aims to produce 2.2 million barrels of oil per day (bpd) next year, below a prior outlook for more than 2.3 million bpd provided in the comparable strategic plan released last December.

Preferred shares of Petrobras slid more than 1% in morning trade on the Sao Paulo stock exchange.

The new 2020-2024 business plan provided “short term disappointment, long term upside,” Credit Suisse analyst Regis Cardoso told clients in a note, adding that he had expected a 2020 oil output target of up to 2.4 million bpd.

Petrobras said its 2020 output estimate reflected natural production decline in mature fields and maintenance stoppages. The estimate was prone to a variation of 2.5%, up or down, the company said.

Goldman Sachs analysts said the 2020 oil production target was 12% below their estimate, but underscored that the company’s long-term production outlook was higher than their expectations.

Petrobras raised its oil production target for the end of the five-year period to 2.9 million bpd, reflecting aggressive development of major offshore prospects, as the company sells downstream assets to focus on exploration and production.

Investors have grown impatient with repeated delays of that ramp up. In July, the company said it would not boost oil output by 10% this year as forecast, cutting its 2019 target to 2.1 million bpd from 2.3 million bpd.

The delays, along with a near no-show among oil majors at a record oil auction this month, have dampened enthusiasm for Brazil as Latin America’s emerging petroleum powerhouse, which some say is held back by Petrobras’ balance sheet.

The company’s latest divestment plan forecasts sales of $20-$30 billion over the next five years to reduce debts, concentrated in 2020 and 2021. The forecast was roughly in line with a target of $26.9 billion in the previous five-year plan.

Petrobras plans to invest $75.7 billion between 2020 and 2024, with 85% of the total being allocated to exploration and production. Capital spending for the period fell from $84.1 billion in the 2019-2023 period, underscoring a sunset for the company’s most aggressive period of offshore investments.

The company’s target for net debt to equal about 1.5 times earnings before interest, taxes, depreciation and amortization (EBITDA) remained unchanged. (Reporting by Roberto Samora Additional reporting by Marcelo Rochabrun, Gram Slattery and Stephen Eisenhammer Editing by Brad Haynes, Alistair Bell and Marguerita Choy)

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