Petrobras Approves $236.7B Investment Plan for 2013-2017

RIO DE JANEIRO - Brazilian state-run energy company Petroleo Brasileiro SA, or Petrobras, said late Friday that it plans to invest $236.7 billion over the next five years, maintaining spending and production targets at the same levels as last year plan.

The 2013-2017 investment plan remains one of the world's largest corporate spending plans, but is up only marginally from the $236.5 billion Petrobras earmarked for investments in the 2012-2016 period. Petrobras has been criticized by analysts and investors because its hefty investment spending has not resulted in increased crude oil production, despite finding some of the world's largest oil discoveries in 20 years.

The company failed once again to meet its production target in 2012 as maintenance shutdowns at aging offshore platforms and declining output in the mature Campos Basin undermined crude-oil production. Petrobras ended 2012 with average domestic crude-oil production of 1.98 million barrels a day, short of the 2.02 million barrel-per-day target, and expects output to remain stable in 2013.

Financial measures have also tracked a deterioration in the company's balance sheet as Petrobras continued to spend more than it earns, a situation that will peak during the 2013-2017 investment plan, Petrobras said. In 2013, Petrobras will make its largest annual investment while generating its lowest operational cash flow. Petrobras expects to start generating more cash than it spends in 2015, the company said.

Despite the gloomy financial outlook, Petrobras said it was committed to maintaining its investment-grade credit rating and pledged not to sell shares to fund the 2013-2017 investment plan. Leverage should remain below 35%, and the company's level of net debt should return to the company's target of 2.5 times earnings before interest, taxes, depreciation and amortization in 2014, Petrobras said.

Exploration and production will receive nearly two-thirds of the 2013-2017 investment budget at $147.5 billion, Petrobras said. The emphasis will be on installing new platforms, with 11 new production units expected to come onstream between 2013 and 2015. Crude-oil output is expected to reach 2.75 million barrels per day by 2017, Petrobras said. By 2020, crude-oil output is expected to hit 4.2 million barrels per day.

Petrobras's troubled refining division will see spending fall slightly to $43.2 billion after the company completed overhauls at existing refineries from the previous plan. Two main refining projects, Abreu e Lima and Comperj, are currently under construction, while Petrobras is evaluating plans to build two more new refineries. The company is expanding its refining park to meet increased demand for fuels. Petrobras has been forced to increase imports of gasoline and diesel fuel because of a refining shortfall.

Budgeting for the investment plan was based on Brent crude, Petrobras's reference crude oil price, at around $100 a barrel over the 2013-2017 period, the company said.

Petrobras also expects Brazil's currency, the real, to trade between BRL1.85 and BRL2.00 to the U.S. dollar during the five-year period. The real ended Friday at BRL1.98 to the dollar.

Copyright (c) 2012 Dow Jones & Company, Inc.


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