Petrobras Ups Investment, Divestment Goals In New 5-Year Plan
Zacks Investment Research | Dec 05, 2018 09:34PM ET
Scarred by corruption scandal and huge debt burden, Petróleo Brasileiro S.A. or Petrobras (NYSE:PBR) recently unveiled its new five-year plan (2019-2023), which highlights the company’s aim to revive its financial health and boost overall performance.
The 2019-2023 business plan of Petrobras is released as Roberto Castello Branco prepares to head the company from Jan 1, 2019, as part of the new Brazilian government led by Jair Bolsonaro. Notably, Branco will replace Ivan Monteiro, who became interim CEO in June after Pedro Parente resigned amid the nationwide trucker strike in Brazil.
Per the new five-year plan, the company has raised its investment and divestment targets, which will help to boost growth and credit metrics.
Insights Into Investment Intent
The Brazilian oil giant intends to invest $84.1 billion between 2019 and 2023, representing nearly 13% increase from its projected investment of $74.5 billion through 2018-2022.The prudent capex program, in sync with ambitious production plans, is likely to boost the company’s top-line growth.
Notably, more than 80% (or 68.8 billion) of the company’s investment will be targeted toward exploration and production activities. Boasting a lucrative portfolio, particularly in Brazil’s pre-salt reservoirs that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water, Petrobras intends to sharpen its focus on these exploration areas. The company has allocated approximately 56% of its production-related spending for the pre-salt region.
Considering Brazil's huge pre-salt oil reserves, estimated at 9.5-14 billion barrels of oil equivalent and widely thought to be the most important oil find in the recent years, Petrobras is in an enviable position to maintain an impressive production growth profile for years to come. Per its ambitious five-year plans, the company intends to boost average production in 2019 to an expected 2.8 million barrels of oil equivalent per day, with 5% average annual growth till 2023. The plan will be supported by the 13 new platforms coming online by 2023.
Petrobras is entering into various strategic partnerships with foreign oil giants to drive exploration momentum. In this regard, the company has inked deals with major players like TOTAL S.A. (NYSE:TOT) , Royal Dutch Shell (LON:RDSa) plc Original post
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