Petrobras cuts production and reduces investments due to supply shock and coronavirus

According to the company, the value of investments for 2020 will be reduced from US$ 12 billion to US$ 8.5 billion (with US$ 7 billion in cash view)…

“…mainly due to the postponement of exploratory activities, interconnection of wells and construction of production and refining facilities, and the devaluation of the Real against the US dollar”.

The set of measures announced by the entity involves cutting production, contracting only more loans, postponing the payment of dividends to shareholders and postponing new hiring for a period of 90 days.

“The company will assess market conditions and, if necessary, make new adjustments to oil production, always ensuring safety conditions for people, operations and processes“, he stated.

Brent oil prices, which is the international benchmark, have dropped by almost 60% in 2020. All of this amid the negative repercussions of the current pandemic on demand. In addition to the market dispute between Saudi Arabia and Russia, which should generate a “oversupply” (“oversupply”) of the commodity.

Petrobras: check the list of measures to reduce costs and preserve cash announced by the company:

• Disbursement of committed credit lines, in the amount of around US$ 8 billion, as announced on 03/20/2020;
• Disbursement of two new loan lines totaling R$ 3.5 billion;
• Postponement to 12/15/2020 of the payment of dividends based on the 2019 annual result, in the amount of R$ 1.7 billion. This proposal will be submitted to the approval of the Ordinary General Meeting, which was rescheduled for 04/27/2020.
• Postponement and reduction of expenses with human resources, in the total amount of R$ 2.4 billion, including postponement of the payment of overtime, of the Performance Bonus Program;
• Postponement of the payment of 30% of the total monthly compensation of the President, Directors, Executive Managers and General Managers;
• Cancellation of advancement and promotion processes for employees and advancement of rewarded functions in 2020;
• 50% decrease in the number of employees on partial notice over the next three months and temporary suspension of all training;
• Reduction of investments scheduled for 2020 from US$ 12 billion to US$ 8.5 billion (US$ 7 billion in cash);
• Decrease in operating expenses by US$ 2 billion. Including the hibernation of platforms operating in shallow water fields, suspension of relevant new hires for a period of 90 days;
• Contraction of 100,000 bpd in its oil production by the end of March. Due to the “oversupply” of this product in the foreign market and the reduction in world demand.

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