Rio de Janeiro-based Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) intends to invest $19 billion on refining, exploration and production activities in 2017. This would be 30% higher than its investments on these activities in 2016. The company has been on a campaign to offload non-core assets from its portfolio to lower its debt and improve its liquidity position to regain investment grade status.
The total debt of the most indebted publicly listed energy company in the world stood at around $120 billion, according to the latest securities filing. The company became highly leveraged due to heavy subsidies by the government and the corruption scandal. Currently, the big three credit rating agencies, namely Standard & Poor’s (S&P), Moody’s Investor Services and Fitch Ratings have given Petrobras a below investment grade rating.
The CEO of Petrobras, Pedro Parente, informed reporters that the company intended to follow its fuel pricing policies with the utmost strictness. Since his appointment in May last year, the company has started following a fuel pricing policy that incorporates the impact of global fuel prices and the currency fluctuation of the Brazilian real against the dollar. Fuel prices are revised at least once every month. Mr. Parente also disclosed that the company had $22 billion in cash at the beginning of this week, which should be adequate for Petrobras to conduct its operations for the next two-and-half years.
Since his appointment, Petrobras has been able to stage a turnaround as the company lowered its total debt by more than $10 billion, restructured the corporate governance policy and increased production from its operations. These steps haves been welcomed by investors as the company was able to raise $4 billion in the Latin American market, double of what it had anticipated. Furthermore, the company also received $5 billion in financing from the China Development Bank (CDB).
Petrobras would be further improving its liquidity position by offloading $21 billion worth of assets from its balance sheet during 2017-18. During 2015-16, the company sold $13.6 billion worth of assets but missed its target by nearly $1.5 billion.
Furthermore, in a securities filing today, the company revealed that its average production during 2016 stood at 2.144 million barrels per day (MMbbl/d). This reflects an increase of 0.8% year-over-year (YoY) and in line with the forecast of 2.145 MMbbl/d. This is the second consecutive year that Petrobras has met its annual production target. The company has been focusing upon on increasing its production from offshore exploration. Meanwhile, for the month of December, the average daily production stood at 2.3 million barrels.