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Brazil's Petrobras Says Investment Plan Will Boost Output

Brazils Petrobras Says Investment Plan Will Boost Output
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Παρ, 4 Οκτωβρίου 2013 - 18:40
Brazilian state-run oil giant Petrobras (PBR, PETR4.BR) on Friday responded to a Moody's Investors Service credit rating downgrade by saying the company's ambitious investment plan will lead to increased output and cash flow.
Brazilian state-run oil giant Petrobras (PBR, PETR4.BR) on Friday responded to a Moody's Investors Service credit rating downgrade by saying the company's ambitious investment plan will lead to increased output and cash flow.

On Thursday, Moody's Investors Service downgraded Petrobras, citing a high level of financial leverage and persistent cash flow problems in the face of a massive government-ordered investment program. Moody's downgraded the Petrobras rating to Baa1 from A3.

Petrobras responded to the downgrade in a written statement Friday, acknowledging the Moody's action but noting the company's credit rating is still well within investment grade territory.

Moody's said the downgrade "reflects Petrobras's high financial leverage and the expectation that the company will continue to have large negative cash flow over the next few years as it pursues its capital spending program." Moody's said "the outlook remains negative."

In response, Petrobras said its $237 billion 2013-2017 was robust. Petrobras added that "the company has adopted a much more rigorous procedure for approval of new projects...in addition, the implementation of the investment program will significantly increase the company's output of oil and natural gas." Petrobras forecast production of crude oil equivalent at 3.4 million barrels per day by 2017 and 5.2 million by 2020.

Regarding financial leverage, Petrobras said, "the current debt profile is well distributed and balanced in relation to future cash flow." The company said debt maturities, which average seven years or more, are timed to coincide with increased production and cash generation.

With Thursday's move, Moody's rating for the huge Brazilian company came into line with ratings by Standard & Poor's and Fitch.

In its own statement Thursday, Moody's said "we are maintaining a negative outlook on Petrobras's ratings to assess the company's execution on its capital program and achievement of targeted production growth, as well as the trend in leverage, which should begin to decline after 2014."

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