Petrobras cuts capital budget for 2015-16

Petroleo Brasileiro SA (Petrobras) reported further cuts to its capital budget, reducing planned spending for 2015 by $3 billion to $25 billion and by $8 billion to $19 billion for 2016. The company cited low crude oil prices and unfavorable exchange rates.

Petrobras maintains a divestment target of $15.1 billion for 2015-16, with $700 million in 2015 and $14.4 billion in 2016. Average oil production targets are unchanged at 2.125 million b/d in 2015 and 2.185 million b/d in 2016.

“As recently as 2 years ago, capital spending was running at over $40 billion,” Financial services firm Raymond James & Associates Inc. said in an Oct. 6 energy update. “To be sure, the Brazilian real’s depreciation [down 32% year-to-date] plays a key role here, so in local currency terms the change is much smaller than in dollar terms,” RJA said.

The analyst noted, however, “All in all, we are surprised by the magnitude of these latest cuts, even though the June business plan already signaled prolonged austerity for the company.”

Petrobras in August reported first-half net income of $1.69 billion, down 43% year-over-year (OGJ Online, Aug. 10, 2015). Its second-quarter net income plunged 90% year-over-year to $154 million.

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