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Petrobras Divestment Plan Pushing Ahead

By  AOG Staff Friday, 01 March 2019 05:39
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Petroleo Brasileiro SA is expanding its ambitious divestment program and has "bold" plans for future sales, the Brazilian state-run oil company's chief executive said after the firm reported its first annual profit in five years.

© Celso Pupo / Adobe Stock
© Celso Pupo / Adobe Stock

On a post-results conference call with analysts on Thursday, CEO Roberto Castello Branco said selling non-core assets will be the key to reducing debt.

Shallow-water and onshore fields are among the first on the block, while the company hopes to complete the sale of its TAG pipeline unit "soon" and several options are being considered for the future of distribution unit Petrobras Distribuidora SA , executives said.

The company will have a new model for the sale of refineries, a process that would bring in billions of dollars, "perhaps within three months," Castello Branco told reporters on a separate call.

Petrobras, as the company is known, can reduce its ratio of net debt to earnings before interest, taxes, depreciation and amortization, or EBITDA, to 1.5 or even to 1, with the help of divestments, he added. The ratio at the close of the fourth quarter was 2.34.

The University of Chicago-educated CEO, who took the reins in early January, has long been vocal about the need to slim down the sprawling company and focus on core activities such as exploration and production. Thursday's comments were some of his most assertive on the matter.

Debt reduction could occur through various initiatives, the most important of which are "a more aggressive divestment program and getting out of assets where we're not a natural owner," Castello Branco said.

"Really, get out - not sell a part of the asset."

The company posted a fourth-quarter profit on Wednesday night of 2.102 billion reais ($564 million). That was significantly below analysts' expectations, impacted by more than 11 billion reais of one-time writedowns and judicial contingencies.

Still, analysts were generally pleased by strong free-cash flow and steady debt reduction. EBITDA came in roughly in line with expectations.

Brazil's energy council said separately on Thursday it had scheduled for Oct. 28 an auction of deepwater oilfields that will follow the resolution of a complex dispute between Petrobras and the government over the so-called transfer-of-rights area.

While the dispute in question has not yet been resolved, it will result in a significant windfall for Petrobras when the parties finally come to terms.

Castello Branco said any proceeds from that resolution were not part of Petrobras' deleveraging plan, and could be used to participate in the auction.

Brazil-listed preferred shares of Petrobras were in the black in morning trade, but were off 0.96 percent by the afternoon. That still beat Brazil's benchmark Bovespa index , which was down 1.63 percent.


($1 = 3.73 reais)

(Reporting by Gram Slattery; editing by Meredith Mazzilli and Rosalba O'Brien)

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